The ‘King of AIM’ has rocketed 12% today but you should check out the Boohoo share price too

Harvey Jones says Boohoo Group plc (LON: BOO) and its royal fashion rival are growth monsters but success comes at a price.

| 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.

Dial being turned up to 'high'

Image source: Getty Images.

After a distinctly uncool year, AIM-listed global online fashion retailer ASOS (LSE: ASC) has fresh swagger after its final results showed sales leapt 26% to £2.4bn over the last year. Its stock rocketing 12% on the news.

Fashion king

ASOS has been described as the King of AIM, the largest stock on the index with a current market-cap of £4.65bn, almost big enough to plop it into the FTSE 100. However, it’s been overshadowed by fellow online fashionista Boohoo Group (LSE: BOO), which is up a mighty 563% over the last three years, against 63% share price growth at ASOS over the same period.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

ASOS took a beating after warning in July that sales would be at the lower end of expectations. But that’s all forgotten after today’s glorious catwalk comeback. It also reported a 28% rise in pre-tax profits to £102m, while gross margins rose 140 basis points to 51.2%.

Global hub

The group is also expanding internationally, with its US hub phase one operational, and its Euro hub in phase two “progressing well”, as CEO Nick Beighton pursues his goal of “building ASOS into the world’s number one destination for fashion loving twentysomethings”.

ASOS is making a profit while pursuing an expensive investment programme. It now has a cash balance of £43m, reflecting working capital and capex investment, and recently agreed a new £150m three-year facility.

Take AIM, fire

ASOS is another market darling that lost its charm, tempting contrarians, but investors are swooning once more today. Approach with caution because it is not cheap, trading at a forecast valuation of a whopping 52 times earnings. It’s justified this with strong earnings per share (EPS) growth of 43%, 25% and 28% in the last three years. But any sign that momentum is flagging will spook investors, as we saw in July.

EPS growth is forecast to slow in the year to 31 August 2019, but 19% is still impressive, while its revenues are forecast to rise another 25% or so, to hit nearly £3bn.

Tears for fears

AIM-traded Boohoo is similarly pricey, trading at 54.2 times earnings which again, leaves little margin for error. Both groups need to establish themselves as global fashion destinations to justify that kind of price. Domestic success alone will no longer cut it.

Boohoo posted successive EPS growth of 48%, 101% and 48% over the past three years but, again, there are signs of a slowdown. It’s forecast to grow ‘just’ 20% in the year to 28 February 2019, then 24% the year after. Once again, that remains impressive.

Pretty tempting

Boohoo, which own women’s fashion line PrettyLittleThing, now has a market-cap of £2.54bn, so perhaps it should be crowned the Queen of AIM. It recently reported a 22% rise in six monthly earnings to £24.7m, with revenue up 50% to £395.3m, and predicted revenue growth of between 38% and 43% in the year to 28 February. However, there’s still a chance that it could crash 50% by the end of the year.

Our AIM royals are both enjoying success at home and abroad and look tempting, provided you are willing to pay a premium price for budget fashion.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

harveyj has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group. 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

Why a bear market is an investor’s best friend

A bear market can certainly be scary. But any investor tempted to sell might benefit by looking at Warren Buffett's…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price could be stuck below £1 for a while. Should I buy?

The Rolls-Royce share price has been trading at penny stock levels since April. Could the stock be a bargain at…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m aiming to make £45,000 in passive income with UK shares and never work again!

Investing regularly in UK shares can generate a substantial passive income over the long run. Zaven Boyrazian demonstrates how.

Read more »