Now May Be The Time To Buy ASOS plc

Shares in ASOS (LSE: ASC) have been hit by a tidal wave of bad news this year.

Indeed, during the last eight months, ASOS has issued a profit warning and a major fire wiped out £22m worth of stock at the company’s main distribution centre. Investors have also expressed concern over the company’s sky high valuation and growth forecasts. 

The final nail in the coffin came last week when analysts at broker Goldman Sachs removed the company from their “conviction buy” list and cut earnings forecasts. All in all, year to date, excluding today’s gains ASOS’s shares have fallen 62% — but now could be the time to buy. 

Out of favour ASOS

In the words of Baron Rothschild, “the time to buy is when there’s blood in the streets” and right now there is defiantly blood on the streets with regard to ASOS’ share price. 

Luckily, ASOS also appears to be attractively priced right now based on City forecasts for growth over the next few years.

Unfortunately, management plans to spend on infrastructure this year, in order to meet future demand, although this is at the expense of short-term profits. Specifically, earnings per share this year will fall 18% as the company investors for the future.

Nevertheless, during 2015 earnings per share are expected to expand 42%, wiping out this year’s losses. What’s more, with this growth pencilled in for 2015, ASOS is currently trading at a 2015 PEG ratio of 0.9, indicating growth at a reasonable price. 

Investing for the future

Still, it’s great news that ASOS’ management is investing for the future now rather than further down the road. Indeed, as the company boosts its capacity now, the group should be able to out manoeuvre peers in the future, dealing with more volume at a lower cost.  

Additionally, ASOS remains a first-mover within its field, giving the company a significant strategic advantage over peers. Of course, the company is also set to benefit from the increasing volume of goods sold online. Once again, ASOS is in a prime position to benefit from this trend as the company’s first mover advantage and strong branding draw the customer in. 

Paying a premium 

Of course, only you can decide if ASOS still deserves a place within your portfolio. The trouble with ASOS is the fact that the company has already been discovered and as a result, investors are prepared to pay a premium for the shares.

But there are other opportunities out there. The key, when searching for growth stocks, is looking under the radar. You want to get on board while the company is still an unknown quantity.

Analysts here at the Motley Fool have identified a share that we believe has the potential to nearly double profits within the next four years. So, if you're a keen growth investor looking for ideas, download this exclusive report entitled "The Motley Fool's Top Growth Stock For 2014".

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.