The Motley Fool

Why I’d buy Boohoo after its share price decline

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

The online shopping surge has turbocharged investor interest in many UK retail shares. But the Boohoo Group (LSE: BOO) share price hasn’t failed to balloon despite the e-commerce boom. It’s down 15% on a 12-month basis.

City analysts think Boohoo’s earnings will rise 20% and 26% in the next two fiscal years (to February 2022 and 2023 respectively). This leaves the UK e-commerce share trading on a forward price-to-earnings (P/E) ratio of 25 times. Is Boohoo’s share price decent value at current prices? And should I go dip buying the company’s shares?

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Why I’d buy following Boohoos share price woes

It’s important to remember that Boohoo’s share price has still risen an impressive 170% over the past five years. And there are good reasons to expect it to resume its upward path before too long. These include:

  • E-commerce should keep growing strongly. Investor appetite for Boohoo has dulled as non-essential retail has re-opened and bricks-and-mortar retailers grab business back from online rivals. It’d be a mistake to think the e-tail party’s over though, as industry forecasts suggest strong and sustained growth. So e-commerce specialists like this remain in great shape to keep growing profits.
  • Big investment for future growth. I’m encouraged by Boohoo’s huge spending plans to make the most of this opportunity too. A month ago, it announced plans to recruit another 5,000 workers over the next five years and invest heavily in IT. This follows the addition of a fourth warehouse in the spring as it acquired a new processing facility in Northamptonshire.
  • Its market-leading brands. Boohoo’s also spent big to snap up some of the UK’s best-loved fashion labels. Brands such as Debenhams, Karen Millen and Oasis have been salvaged over the past year and added to its already-packed portfolio which includes PrettyLittleThing and Nasty Gal.

A great growth stock

There’s no such thing as a ‘dead cert’ when it comes to share investing of course. And there are a number of reasons why Boohoo’s share price could struggle over the long term. One is the intense competitive landscape, an environment which is toughening quickly as more and more retailers invest in e-commerce. Margins at fashion retailers are notoriously thin and Boohoo could strain to make a profit as the competition heats up.

There’s also a possibility that the popularity of ‘fast fashion’ will nosedive. Consumer awareness over the environmental and social impact of cheap clothes production is steadily growing. In fact, Boohoo is currently overhauling its supply chain amid revelations of poor working practices at its suppliers.

All that being said, I think Boohoo’s share price fall represents an attractive buying opportunity. The retailer has a lot of hard work ahead to deliver strong profits growth and justify its premium rating.

But I’m encouraged by the company’s ambitious growth plans and the steps it’s taking to address supply chain faults through its ‘Action for Change’ improvement programme. I think this could be one of the best UK retail stock for me to buy right now.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Royston Wild has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.