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Here’s why I’d buy the JD Sports share price right now

Sports Direct is rarely out of the news thanks to controversial boss Mike Ashley, but don’t let that overshadow the success of arch-rival JD Sports Fashion (LSE: JD). The stock was up almost 4% today to touch a record high 560p after publishing a blistering 49.2% rise in revenues to £4.7bn, beating analyst expectations.

Sporty!

The sports, fashion and outdoor retailer posted a 26.8% rise EBITDA earnings before exceptional items to £488.4m, while headline profit before tax and exceptional items jumped 15.5% to £355m. Total like-for-like sales grew more than 6%, despite challenges in the group’s core UK retail market.

The £5.2bn group’s share price is now up 53% over the past 12 months, and 565% over five years. Who said the high street was dead on its feet?

Brand power

Executive chairman Peter Cowgill hailed excellent progress” with headline profit up by more than £250m over the last four years, a compound rise of more than 37% a year. He said the dynamic multibrand multichannel proposition of the core JD fascia” should continue to exceed consumer expectations and prosper in an increasing number of international markets.

The FTSE 100 group’s recent £396m acquisition of Finish Line in the US has significantly extended its global reach with the trial of the JD fascia delivering encouraging early results, he added. This gives it a major opportunity in what’s the world’s largest sports fashion market.

Growth hero

JD Sports is preparing to finalise another acquisition, of UK-based Footasylum, and investors are sharing in the success, with the final dividend up 5.1% to 1.44p. That makes the total dividend for the year 1.71p, up 4.9%. Few would buy the stock for its yield, though, currently a meagre 0.4%. This is all about the growth, but that has been spectacular.

However, it’s also worth noting that the dividend is covered a massive 15.9 times earnings, so there’s plenty of scope for further progression here.

More to come

There are signs that earnings per share may now start to ease off, after growing 58%, 55% and 32% in the three years to 2018. Growth slowed to 12.9% this year, with analysts predicting 10% and 11% for the next couple of years. That’s still pretty good, though.

Rupert Hargreaves saw today’s success coming, naming JD Sports one of his 3 top growth stocks for April. He also notes that shares in the company have historically commanded a P/E of around 18, which makes today’s forecast of 16.2 look decent value. It may be an above average valuation for a retailer these days but there’s a good reason for that.

Warehouse worry 

JD Sports is battling with all the usual high street woes, including rising salaries and falling footfall. I should also pass on broker AJ Bell’s warnings that the group faces a major infrastructure issue as it must invest heavily in warehouse capacity to keep up with demand.

Today, JD Sports warned that enlarging its primary Kingsway warehouse has caused some “disruption and inefficiency to our operations with increased downtime from the existing automation equipment,” so everything isn’t plain sailing.

However, JD Sports is still on the front foot in contrast to Sports Direct, which has suffered a share price slump.

Capital Gains

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.