Boohoo.com: a hot growth stock I’d buy today and hold forever

Royston Wild explains why Boohoo.com (LON: BOO) is a stock to buy today and love forever.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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 outlook for many of the UK’s clothing retailers is tougher than it has been for decades, so investors need to think carefully before taking the plunge in this particular sector.

Many of Britain’s listed retailers have been peppering the market with concerning trading details for well over a year now. That includes Marks & Spencer, which was again putting out scary numbers in Wednesday business.

It advised that demand for its clothing and homewares lines continues to decline, with related like-for-like sales falling 3.4% in January-March, versus 2.8% in the prior quarter. M&S cited a “more challenging market” as one of the reasons behind a sales slump during the second half of the year. Consequently, it’s putting its foot on the gas to embrace the fast-growing e-commerce segment through further waves of restructuring.

Investment paying off

Unlike M&S, Boohoo.com (LSE: BOO) has had no such problems, thanks to its already-robust position in the critical online marketplace. And this was underlined in recent trading numbers.

The AIM-quoted business advised in April that group revenues almost doubled during the 12 months to March to £579.8m, a result that propelled adjusted pre-tax profit 60% higher to £51m. The number of active customers at its core boohoo.com website increased 22% to 6.4m, underlining the massive impact the investment in its online platform has had.

But arguably its PrettyLittleThing division — a unit it acquired back in 2016 — stole the headlines. Customer numbers here leapt 128% in fiscal 2018 to 3m active users.

C0-chief executives Mahmud Kamani and Carol Kane lauded the results, commenting: “Against a backdrop of difficult trading in the UK clothing sector, the group continued to perform well, gaining market share in the expanding online sector.” And Boohoo.com has plenty of financial strength to continue investment in its brands as well as behind the scenes to keep sales rampaging higher. Net cash ballooned to £133m as of March from £54.8m a year earlier.

Kamani and Kane continued that “we believe that the benefits of our investments in marketing and warehouse automation will generate economies of scale to allow us to drive sales growth of at least 25%.” The business is expecting revenue growth of 35%-40% during the 12 months to March 2019.

Global superstar

Reassuringly for nervous investors, Boohoo.com’s tentacles are not restricted to just the UK, with its vast international presence providing some protection from the impact of declining consumer spending power in its core marketplace.

And the business is picking up momentum in these overseas territories. International sales leapt 364% last year and, given its relatively low market penetration abroad, it has plenty of business left to win. It’s planning a series of measures including the introduction of more country-specific websites to drive sales from foreign customers too.

City analysts are expecting the online giant to continue building earnings at a rapid rate and advances of 14% and 26% are forecast for fiscal 2019 and 2020, respectively.

Now Boohoo.com may be expensive, with the firm carrying a forward P/E ratio of 54.8 times. But this is a small price to pay given the rapid progress it’s making all over the world. I expect the business to prove an excellent stock to buy in the years to come.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo.com. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »