Why I think the JB Hi-Fi share price is a long-term buy today

It could be time to go shopping for this stock.

| More on:
Woman with headphones on relaxing and looking at her phone happily.

Image source: Getty Images

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

sdf

The JB Hi-Fi Limited (ASX: JBH) share price has fallen noticeably from its peak, down close to 20% from March 2022, as we can see in the chart below.

That's not the biggest decline in the ASX retail share sector over the last year or two, but it does present investors with an interesting opportunity.

While it's possible that the JB Hi-Fi share price could keep falling, I think that at this level it represents a long-term opportunity.

Resilient demand

I believe that JB Hi-Fi's revenue is more resilient than what some investors think.

Demand for TVs and drones may go up and down, but the company sells a large amount of products which could see ongoing demand even if the elevated cost of living hurts households. I think people will need to keep buying home appliances. Smartphones seem integral to a lot of people's lives, and laptops are necessary for work and so on.

Despite all of the economic headwinds that Aussies are facing, in a recent trading update for the first quarter of FY24, we saw that JB Hi-Fi Australia's total sales had only declined by 0.1% year over year, though The Good Guys had seen a decline of 12.2%. JB Hi-Fi New Zealand sales were actually up by 1% in the FY24 first quarter.

Considering the JB Hi-Fi share price has fallen, I think the valuation makes sense. According to the earnings estimate on Commsec, the JB Hi-Fi share price is valued at 13x FY24's estimated earnings.

Strong business model

There are four key competitive advantages that the business can point to, which give it an economic moat against competitors.

First, there is the company's scale which gives it buying power and other advantages.

Second, it has a low-cost operating model which enables strong margins and very productive sales floors.

The third competitive advantage that the company notes is its multichannel capability across stores, online, phone sales and so on. JB Hi-Fi tries to make it as easy as possible for customers to buy.

The final key advantage that the company highlights is its people and culture.

I think it's the business model and its competitive advantages that enable the company to perform well year after year, and why it's able to earn strong margins (for its industry).

Good dividends

JB Hi-Fi has paid lots of good dividends over the past decade. It increased its dividend every year from 2013 to 2022, which is a solid record considering that period included COVID-19.

According to the estimate on Commsec, the company is projected to pay an annual dividend per share of $2.23 in FY24. At the current JB Hi-Fi share price, that would equate to a grossed-up dividend yield of 7.1%.

Considering this dividend is the projection for what could be a weak year for retail, it's a solid starting yield, in my opinion.

Motley Fool contributor Tristan Harrison 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 recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

A trio of ASX shares analysts huddle together in an office with computer screens all around them showing share price movements
Opinions

2 of the best ASX 200 shares to buy right now

I think these stocks are excellent buys for the long-term.

Read more »

Concept image of a businessman riding a bull on an upwards arrow.
Opinions

I'm very bullish on these 2 ASX stocks

I think these are two of the best ASX investments money can buy.

Read more »

Young businesswoman sitting in kitchen and working on laptop.
Opinions

Should I buy Berkshire Hathaway or Soul Patts shares?

Both have been stand out investments over the long term.

Read more »

A photo of a young couple who are purchasing fruits and vegetables at a market shop.
Opinions

Here are 2 of the ASX's most hated shares. Which should I consider buying?

Could today's dogs be tomorrow's stars?

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Opinions

Where I'd invest $5,000 into ASX shares today

I’m excited by what these stocks can achieve.

Read more »

An analyst wearing a dark blue shirt and glasses sits at his computer with his chin resting on his hands as he looks at the CBA share price movement today
Opinions

What are Soul Patts shares worth?

This company has delivered strong gains. But what is its intrinsic value?

Read more »

Two funeral workers with a laptop surrounded by cofins.
Opinions

2 exciting ASX 300 shares on sale right now

I’m bullish about these exciting businesses.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Opinions

Is it time to buy these 2 beaten-up ASX shares in 2025?

These stocks have dropped this year. Are they some of the best opportunities on the ASX?

Read more »