The Boohoo (LSE: BOO) share price has clocked up one of the best performances of any stock trading in London so far this year. Indeed, year-to-date, shares in the fast-fashion retailer are up nearly 50%.
This is a huge turnaround from the company’s performance last year. The stock lost nearly 20% in 2018 as investors started to fret about its growth potential and valuation.
Boohoo has proven its doubters wrong over the past 12 months with a series of robust trading updates. At a time when so many high street retailers are struggling to remain solvent, sales at the online retail giant have continued to grow exponentially. It doesn’t look as if the company’s growth is going to slow down any time soon.
At the end of April Boohoo, which sells its own branded clothes alongside PrettyLittleThing, Nasty Gal and MissPap, reported revenue growth of 48% to £856.9m for its 2019 financial year. These figures blew past analyst expectations. The City was expecting growth of just 46%.
Unfortunately, the company didn’t manage to hit profitability targets. Analysts were expecting the group to report pre-tax profit growth of 55% to £67m, but the final number came in £7m lower at a shade under £60m.
Still, the impressive sales figures restored confidence in the company and its outlook, and analysts are expecting more of the same of this year. They’ve pencilled in earnings growth of 35% for fiscal 2020 followed by growth of 27% for 2021.
However, following an announcement today from the company, there is a strong chance analysts might have to go back and revise these numbers higher.
Management has announced that the company has made an offer to buy “the online business of renowned British brands Karen Millen and Coast, together with all associated intellectual property rights.”
According to Boohoo’s press release on the potential acquisition, management believes “the online business of these brands would represent highly complementary additions to its scalable multi-brand platform.”
I think such a deal could boost Boohoo’s growth. The enterprise has a history of acquiring fashion brands and then throwing its marketing weight behind them to turbocharge sales. Under Boohoo’s ownership, these established British brands will also be able to make use of the group’s delivery infrastructure, lowering distribution costs and increasing service quality.
If this deal does go through, I reckon there’s a good chance Boohoo will beat analysts expectations for growth this year.
Time to buy?
So as Boohoo continues to grow, is it worth buying the stock before it is too late?
I think the shares are quite expensive at current levels. They are currently dealing at a forward P/E of 47, but I’ve said this before, and I’ve been proven wrong.
With this being the case, I think it might just be worth buying into this growth story at current levels as it doesn’t look as if Boohoo is going to slow down any time soon. Watching from the sidelines could mean that you continue to miss out on one of the most successful British business growth stories in recent years.
Rupert Hargreaves owns no share 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.