Why Kogan.com Ltd might be a better investment than JB Hi-Fi Limited

Kogan.com Ltd (ASX:KGN) shares are still changing hands at a lower price to its oversubscribed IPO listing price. But if its strong growth continues it won't stay this low for long in my opinion.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When it comes to Australian retail shares more often than not the likes of Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH) will spring to mind for many investors. This is hardly a surprise, after all both are high quality companies which have been producing staggering earnings growth in recent times.

But there is one retail share which doesn't get as much attention, which I believe investors should be considering an investment in. That is online retailer Kogan.com Ltd (ASX: KGN).

Since listing on the Australian Stock Exchange its shares have thoroughly underwhelmed. As of yesterday's close Kogan's shares were still changing hands 6% lower than their $1.80 IPO price.

Perhaps the most surprising part of this is the fact that the company recently announced full year results which beat its prospectus forecasts. Revenue came in 5% higher than forecast at $211.2 million, EBITDA a massive 37.9% higher at $4 million, and net profit after tax a staggering 103% higher at $800,000.

According to the Australian the initial public offering was four times oversubscribed by fund managers. With such strong demand for its shares at $1.80, it is surprising to find its shares languishing 6% lower than that price today despite its strong performance.

Personally, I think it is only a matter of time before the market sees what a bargain Kogan's shares are today. Thankfully I'm not the only one that sees them in this way. In July global investment bank Canaccord Genuity revealed it had initiated coverage on the online retailer with a buy rating and a $2.16 price target.

That price target implies potential upside of around 28% from the last close price. Which makes it an attractive investment option in my opinion.

With market research company Euromonitor estimating that the Australian online retail market will grow at a compound annual rate of 11.5% until 2019, the company certainly is positioned well to deliver solid earnings grow for years to come.

As long as Amazon doesn't decide to open up a local online store in Australia, I feel Kogan would be a great buy and hold investment with potentially stronger returns than even Harvey Norman and JB Hi-Fi.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »