The 2013 calendar year delivered outstanding returns for shareholders of JB Hi-Fi Limited (ASX: JBH), but it's been all downhill since then. The stock rose more than 120% to hit a high of $23.13 in November but has since retreated 34% to be sitting at just $15.28.
As one of Australia's leading retailers, there is debate as to whether the stock presents as a good buy right now.
On the bearish side, you have investors concerned about Australia's retail sector in general. The rapid rise of the online sector is certainly causing headaches for companies like Myer Holdings Ltd (ASX: MYR) and threatening the very existence of bricks-and-mortar retailing. In addition, investors are also concerned about shaky consumer and business confidence which was recently highlighted by a mere 0.1% rise in retail turnover in August. Analysts had been forecasting growth of 0.4%.
Then again, there are a number of reasons to like the business too. Despite the tough retail conditions, JB Hi-Fi still managed to grow sales by 5.3% in FY14 while it grew its net profit by 10.3%, which was largely driven by improving costs and profit margins. The company continues to open new stores while it has a number of new products which are expected to "drive solid sales growth for FY15".
In addition, the roll out of its new 'HOME' format stores should also help drive earnings higher over the coming years.
Buy, Hold or Sell?
JB Hi-Fi is a quality Australian business which I believe offers significant upside potential for long-term focused investors. With the stock also offering a very generous 7.9% grossed up dividend, I think JB Hi-Fi presents as a great buy today.
