The Motley Fool

The ASOS share price vs the Boohoo share price: which is the better buy?

A stack of ASOS delivery bags
Image: Royston Wild

The ASOS (LSE: ASC) and Boohoo (LSE: BOO) share prices have both been stock market darlings.

Unfortunately this year, the companies have fallen from grace. Year-to-date, shares in Boohoo are off 46%, while ASOS has dropped 51%. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Following this performance, I’m attracted to both companies. These are some of the most efficient and fastest-growing retailers in the UK. They’ve revolutionised the world of online fashion and lead an e-commerce revolution across the industry. 

However, if I had to buy just one of these equities, one stands out to me as being much stronger than the other. 

ASOS share price headwinds

ASOS was a first-mover in the UK in the digital fashion space. Investors could buy shares in the company for around 20p just after the dot-com crash when internet retail was still in its infancy.

Since then, the organisation has expanded around the world and redefined the e-commerce fashion market. But the group has never really been able to make the most of its first-mover advantage.

Profit and revenue growth has been sluggish compared to its rival Boohoo, which trades at the fast-fashion end of the market. And following the company’s recent profit warning, it doesn’t look as if this will change.

ASOS’ revenues are up 140% over the past five years, but Boohoo’s have surged 520%. Granted, the latter is at an earlier stage of growth. Its revenues are still half the size of those of its larger peer.

Boohoo share price growth

Boohoo has been able to succeed where ASOS has failed by investing significant sums in marketing collaborations (Boohoo’s just announced its biggest-ever fashion collaboration with mega celebrity Megan Fox). This has helped the company capitalise on social media platforms. And this growth has, in turn, provide additional capital for acquisitions. 

That said, the Boohoo share price has come under pressure recently following accusations of poor working conditions at the company’s factories in the UK. These accusations have thrown a cloud over the group and dented its reputation.

By comparison, ASOS has no such reputational issues, although it has always struggled with razor-thin profit margins. These thin margins mean the group has almost no room for error. Even a slight downturn in revenues or increase in spending can significantly impact the bottom line.

In its 2020 financial year, ASOS’ net profit margin came in at 3.4% compared to 5.2% for Boohoo. 

Which is the better buy? 

So both the ASOS share price and Boohoo share price have their benefits and drawbacks.

However, ethical considerations aside, I’d buy Boohoo for my portfolio. I think the company has a better track record of growth and, as noted above, still has plenty of room to grow. Its fatter profit margins also provide additional capital for the group to chase growth.

Still, due to the ethical considerations outlined above, I realise the group may not be suitable for all investors. 

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and 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.