Up 75% in 2023, I think this ASX All Ords share has loads more room for growth

This stock is delivering the goods in 2023. Here's why I think there's plenty more to come.

| More on:
Playful parents having fun while pushing their small kids in cardboard box as they move into their new home.

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

The Temple & Webster Group Ltd (ASX: TPW) share price has had an incredibly strong year. The All Ordinaries Index (ASX: XAO) share is up 75% in 2023 so far, and I think the long-term looks positive. So let's take a closer look at the All Ords ASX share.

Now, I can't say where the Temple & Webster share price is heading over the next month or next year, but I'm very optimistic about the long term.

There are a number of things that can lead to a company's long-term success. But, there are two elements that I really want to see from an ASX growth share: revenue growth and profit margin growth. And Temple & Webster ticks both of them.

Revenue growth

Revenue growth is crucial because it means the business is growing operationally, it can achieve scale benefits, and there's a strong tailwind for potential profit growth even if margins don't change.

Indeed, the company has suggested that as it becomes bigger, its marketing budget can increase, it can better predict sales for private labels and partners (and meet minimum order quantity thresholds), and invest more in people and technology. It'll help with its fixed cost-to-sales ratio, and be able to invest in new growth areas (such as home improvement).

Temple & Webster recently gave its annual general meeting (AGM) trading update, which showed sales growth of 23% for the period of 1 July to 27 November and sales growth of 42% year over year for the period of 1 October to 27 November. The Black Friday to Cyber Monday trading period saw sales growth of 101% to $17.4 million.

The ASX All Ords share is growing market share at a time when Australia's overall furniture and homewares market is seeing declines.

It aims to become the largest retailer of furniture and homewares in Australia. For now, it's targeting $1 billion of annual sales in three to five years – it made $396 million of revenue in FY23.

Profit margin improvements

Temple & Webster is expecting margins to significantly increase.

In FY23, the ASX All Ords share saw a 'business as usual' earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 3.7%. This is expected to grow to at least 15% in the long term.

In FY26, the retail company plans to start "incrementally building" towards its long-term target. In the shorter term, it's targeting high growth and market share gains. AI usage is one of the things that could help with its customer service staff costs as well as its fixed costs.

As the company becomes larger, the higher margins could enable significantly stronger net profit after tax (NPAT), in my opinion.

Temple & Webster has a fairly capital-light model, so it can produce very pleasing amounts of cash flow and profit as it grows.

By the end of the decade, I believe Temple & Webster can materially generate more than $1 billion of annual sales and produce increasingly impressive margins. I think the ASX All Ords share could significantly outperform the All Ordinaries over the next five to seven years.

Motley Fool contributor Tristan Harrison has positions in Temple & Webster Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

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

Expert's verdict on 3 ASX 200 shares (2 have doubled in value and the other has lost 29%)

Two of these stocks were the best performers of their sectors in FY25. Should you buy, hold, or sell?

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Opinions

Where I'd invest in ASX shares ahead of the likely RBA rate cut

These stocks look too good to miss.

Read more »

Person pretends to types on laptop drawn in sand.
Opinions

I sold one of my oldest ASX 200 shares last week. Here's why

Why would I sell one of my longest-held stocks?

Read more »

Broker analysing the share price.
Materials Shares

Buy, hold, or sell? Broker's verdict on 3 ASX 200 materials shares

Materials was one of four market sectors that weakened in overall value in FY25.

Read more »

A person sitting at a desk smiling and looking at a computer.
Technology Shares

3 ASX 200 tech shares to buy in July: Experts

The ASX tech sector delivered outstanding returns for investors in FY25.

Read more »

A group of executives sit in front of computer screens in a darkened room while a colleague stands giving a presentation with a share price graphic lit up on the wall
Opinions

2 ASX 200 large-cap shares that this fundie is cashing in after phenomenal growth

Shaw and Partners portfolio manager James Gerrish says he knows this will be an 'unpopular call'.

Read more »

Woman and man calculating a dividend yield.
Opinions

Buy or bail? Fundie's verdict on 2 ASX 300 shares

Stuart Bromley of Medallion Financial Group provides his insights.

Read more »

A woman sits in a quiet home nook with her laptop computer and a notepad and pen on the table next to her as she smiles at information on the screen.
Opinions

2 top ASX passive income stocks to buy with $5,000 today

I think these leading ASX passive income shares will keep delivering market beating yields in FY 2026.

Read more »