Breville’s shares are sinking despite reporting strong profit growth…
The post Why the Breville (ASX:BRG) share price is crashing 9% today appeared first on The Motley Fool Australia. –
The Breville Group Ltd (ASX: BRG) share price has been one of the worst performers on the ASX 200 on Tuesday.
The appliance manufacturer’s shares have crashed a disappointing 9% to $30.40.
Why is the Breville share price crashing on Tuesday?
The weakness in the Breville share price on Tuesday has been driven by the release of its full year results for FY 2021.
For the 12 months ended 30 June, Breville reported a 24.7% increase in revenue to $1,187.7 million and a 39.6% jump in earnings before interest and tax (EBIT) to $136.4 million. The latter was ahead of management’s upgraded EBIT guidance of $136 million.
Things were equally positive on the bottom line. Breville revealed a net profit after tax of $91 million, which represents an increase of 42.3% over FY 2020’s profit. This was driven by strong demand due to the working from home trend and its successful international expansion.
So why are its shares under pressure if it outperformed its guidance?
The catalyst for the weakness in the Breville share price today appears to have been driven by supply chain concerns.
Although its inventory levels improved to $217 million from $154 million in FY 2021, over a third of this reported inventory was still goods in transit. So much so, its in-warehouse inventory only recovered 10% from the low position of June 2020. Management revealed that the Suez Canal incident and the partial shutdown of the Yantian port in China are behind the transit delays.
But that isn’t the only supply chain issue. The company notes that there are challenges getting parts for manufacturing its products and supplier costs are increasing. It is because of this and COVID-19 that the company hasn’t provided any real guidance for FY 2022.
Overall, this uncertainty appears to be weighing on the Breville share price. Particularly given the lofty multiples it trades on.
Based on FY 2021’s earnings per share of 65.8 cents, the Breville share price is currently trading at 46x earnings.
Should you invest $1,000 in Breville right now?
Before you consider Breville, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Breville wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.