Why the Kogan share price jumped 8% higher on Monday

The Kogan.com Ltd (ASX:KGN) share price was a strong performer on Monday. Is it time to buy shares?

| 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

One of the best performers on the All Ordinaries index on Monday was the Kogan.com Ltd (ASX: KGN) share price.

The ecommerce company's shares finished the day an impressive 8% higher at $3.83.

Why did the Kogan share price surge higher on Monday?

With no news out of the company or broker notes that I'm aware of, it looks as though investors have been taking advantage of a sharp pullback in its share price over the last 12 months.

After all, despite Monday's strong gain, Kogan's share price has lost over half of its value since this time last year. It is down 55% over the period.

Why is the Kogan share price down 55% in 12 months?

There have been a number of catalysts for the sharp share price decline. These include heavy insider selling, increasing competition, and a softer than expected half year result.

In respect to the latter, Kogan had been one of the fastest growing companies on the ASX until FY 2019.

But due to a combination of slowing sales growth, increased investments in its brand, marketing, and operating infrastructure, Kogan reported a disappointing 11% decline in net profit after tax of $7.4 million in the first half.

Should you invest?

Kogan's shares are currently changing hands at 25x trailing earnings, which is still a significant premium to the market average.

If the company can return to growth again in the second half and deliver a strong profit result, it could well prove deserving of this premium. But until I've seen proof of this, I intend to stay clear of the company's shares and focus on other options in the retail sector that offer better value for money.

These include footwear retailer Accent Group Ltd (ASX: AX1), home furnishings retailer Adairs Ltd (ASX: ADH), and retail group Super Retail Group Ltd (ASX: SUL).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group and Kogan.com ltd. 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 Scott Phillips.

More on Share Gainers

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »