ASOS plunged nearly 20% following trading update – mentioned the other day, that ASOS is very expensive stock and there is a lot expected in the price – even at 56 it assumes 50% growth rate over 5 years.
$LON:BOO – BooHoo.com sold down to 58 also – picked up some shares at 58.5 (half what i would like own), they do sell some great clothes at reasonable prices and don’t see why they cannot replicate the success of ASOS over time.
$300mm issued to institutional and ‘other’ investors ….my broker never mentioned this to me so not sure any goes to retail investors (real shame because in the US they do allocate hot ipos to retail) – need to check the next hot IPO in the UK – pets at home…
What is worth?
According to their Filing to AIM they made 7mm net profit at the end of 2013, so the current market cap of around 780mm prices BooHoo on a 5Y implied growth rate of 60% – around the same as ASOS which trades on an implied growth rate of 56%. So the stock is fairly priced at 70p.
But the market is paying a significant premium to on line fashion retail stocks – 56% implied growth is expensive even for US Standards. ASOS trades on 1.8 consensus growth to implied and the 2CentView rule of thumb is to avoid stocks trading over 1.5x.
However, If you feel this growth is justified, then buy a small piece of BOOHOO…if not wait for a pull back to a more modest 50% growth i.e.45-50p where the stock was priced.