JBH has delivered record sales and earnings growth despite the COVID recession. With a PE of 11x and an ROE of 34.1%. On an earnings basis, JBH seems very attractive. I am Bullish on their future.
But how are they responding to the downfall of brick-and-mortar retailers? Should I Buy JB Hi-Fi Shares?
JB Hi-Fi Shares Price
JB Hi-Fi has fully recovered from the devastation of the COVID crash, with their share price rocketing to record highs in 2021. At the time of writing, ASX: JBH is priced at $48.47. Their share price is down -2.51% over the last 6-months and -3.52% over the course of a year. This is very disappointing compared to the market which is up 21.73% in the last year. Gain access to the market via VAS, analysis here.
JBH’s share price 52-week range is 42.3-55.25.%. Those who managed to grab shares at its low during the COVID crash of 2020, would have enjoyed a 165% increase from trough to peak.
ASX: JBH market capitalization is currently $5.5 Billion. Over the last 10-years, investors have made 231.51% in capital gains. After accounting for dividends, investors have actually enjoyed a total return of 442% over the decade.
Should I Buy JB Hi-Fi Shares: About
JB Hi-Fi is a brick-and-mortar retailer of in-home consumer products. They operate mainly within the consumer discretionary products industry.
The JB Hi-Fi Group, operating under its listed holding company, JB Hi-Fi Limited, brings together two of Australia’s best-known and most trusted retail brands, JB Hi-Fi and The Good Guys. The Group sells an extensive range of consumer electronics, white goods, appliances, and home entertainment at great prices combined with genuine personal service from our specialist staff.
In addition to operating from over 300 stores in Australia and New Zealand and its websites, the Group also services the commercial, insurance, and education sectors and offers information technology and consulting services, through its JB Hi-Fi Solutions business. Source, JB Hi-Fi Group.
In terms of revenues, the Australian arm of the JB Hi-Fi brand is the main contributor to the group, accounting for 67.8% of revenues.
All brands within JBH group are profitable. FY21 was an excellent year across the group with profits rising rapidly. We can see that each group has been able to maintain steady growth.
Should I Buy JB Hi-Fi Shares: Dividend History
JBH shares typically announce a dividend with the release of its half-yearly results in February and full-year results in August as seen in their financial calendar. Dividends are typically paid twice a year, in March (Interim Dividend) and September (Final Dividend).
JBH shares have paid a dividend every year since 2004. This includes the 2008 GFC and COVID recession. JBH shares pay dividends that are fully franked. The current average yearly dividend for JBH shares is $2.70 giving them a very attractive net yield of 5.57% or a gross yield of 7.96% at the current share price.
Should I Buy JB Hi-Fi Shares for their Dividend?
Based on their current yield JB Hi-fi does have a decent dividend yield of 5.57%, or a grossed up 7.96%. This seems very attractive compared to the average term deposit yield of 0.4%.
We never purchase a company based solely on their dividend as this is often not a reliable metric for overall performance. Not all dividend stocks are solid investments. A massive dividend yield can be a red flag as it may be altered due to a massive fall in share price, poor prospects, or a special one-off dividend. For this reason, it is important to consider the business as a whole.
One high dividend stock that we like is CBA. CBA has a gross yield of around 4.25%, and a strong balance sheet to support this. You can have a read of our CBA dividend report here.
Should I Buy JB Hi-Fi Shares: Investor Sentiment
After surveying 57 Investors about their current JBH shares sentiment: BUY-HOLD SELL, as well as their target price over the next 12-months here are the results;
The results from this survey show there seems to be a strong bullish investor sentiment on JBH shares. So how much are JBH shares worth? Let’s get into it.
JB Hi-Fi Shares Fundamentals
|Volume 4W Avg||628,674|
|NTA per Share||$2.15|
Based on their current share price we can see JBH shares have a PE of 11x, which is well below the current inflated average of 20.8x. A company with a low PE could be seen as undervalued or may have poor investor sentiment.
Currently, JBH shares sit in the low PE band.
JBH is a mid-cap company with a total market capitalization of just over $5.5 Billion. This places it as the 96th largest listed ASX company by market cap. A stock of this size tends to be established companies in the process of expanding in industries that are expected to experience rapid growth. Because they don’t tend to be as established as large-cap companies, they generally involve a higher level of risk.
JBH current has a beta of 0.9. Beta is a measure of a stock’s volatility in relation to the overall market. Lower Beta stocks are said to be less risky but provide lower return potentials, Source: Investopedia.
Earnings, Debt, and NTA per Share:
We can see JBH shares currently have earnings per share of $4.406, this gives it its modest PE of 11x. Another way of looking at this is 9% of their share price is backed by solid earnings.
JBH is debt-free. Their Net Tangible Assets per share is $2.15, representing 4.4% of the current share price.
JB Hi-Fi is completely debt-free
JB Hi-Fi being a mid-cap company poses no real risk of market liquidity in my opinion. There seems to be a healthy number of buyers and sellers, in the current market. Their average turnover has been 628,674 or $30.7 Million per day.
JB Hi-Fi Shares Fundamental Comparison
JB Hi-Fi is obviously comparable to Harvey Norman and Kogan, with who it is in direct competition. We can see compared to KGN, JBH has more attractive fundamentals with a great ROE and a cheaper PE. Harvey Norman has an even lower PE ratio but also has a lower ROE.
Should I Buy JB Hi-Fi Shares: Financials
In August the group released its Full-yearly report. JB Hi-Fi delivered a strong set of results despite the COVID-19 pandemic.
Here are the Half-Yearly highlights:
- Total sales up 23.7% to $4.9 billion;
- Online sales up 161.7% to $678.8 million;
- EBIT up 76.0% to $462.8 million;
- Net profit after tax (NPAT) up 86.2% to $317.7 million;
- EPS up 86.2% to 276.5 cps; and
- Interim dividend up 81.8% to 180 cps.
“We are pleased to report record sales and earnings for HY21, in what has been an extraordinary period. Our continued focus on the customer, and investments in our online business and our supply chain, have enabled us to seamlessly meet our customers’ increased demand both in-store and online.”Group CEO, Richard Murray
JB Hi-Fi Australia Results:
Total sales grew by 23.3% to $3.36 billion, with comparable sales up 24.2%. Sales momentum was strong through the half, with continued elevated customer demand for consumer electronics and home appliance products.
The key growth categories were Communications, Computers, visuals, Games Hardware and Small Appliances. Gross profit increased by 22.7% to $737.4 million with gross margin down 9 bps to 22.0%.
Online sales grew 201.9% to $515.6 million or 15.4% of total sales.
JB HI-FI New Zealand:
Total sales were up 9.1% to NZD144.9 million, with comparable sales up 9.1%. The key growth categories were Visual, Games Hardware, Small Appliances and Computers.
Online sales in New Zealand grew 69.2% to NZD16.3 million, or 11.3% of total sales.
The Good Guys:
Total sales grew by 26.4% to $1.45 billion, with comparable sales up 26.4%. Sales momentum was strong through the half, with continued elevated customer demand for home appliances and consumer electronics products.
The key growth categories were Refrigeration, Portable Appliances, Laundry, Floorcare,
Televisions and Computers. Gross profit was $324.6 million with gross margin up 167 bps to 22.4%.
Online sales were up 86.1% to $148.0 million or 10.2% of total sales.
JBH Income Statement
We can see that over the last five years JBH has managed to grow both revenues and NPAT consistently year-on-year. Over the last year, JB Hi-Fi’s profits jumped 67.4% to $506.1 Million. This was attributed largely to higher revenues and better profit margins.
JBH Revenue and NPAT Growth:
JBH Balance Sheet
JB Hi-Fi has managed to grow its balance sheet over the last year. They now hold $263.2 Million in cash and have over $3.25 Billion in assets, an increase of 3.2%. They have also managed to reduce liabilities by $100 Million.
JBH Cash Flow Statement
We can see that over the course of FY21, JBH paid out $310.2 Million in dividends. No shares were issued during the year.
Should I Buy JB Hi-Fi Shares: Technicals
In summary, the short-term upside is likely to prevail as long as $48.4 is supported. The alternative scenario is that a downside breakout of $48.4 would call for $46.5 and $45.4.
Support and Resistance Graph
JBH Insider Ownership and Trading
We can see that the general public and institutions own the majority of JB Hi-Fi shares. This is a common trend amongst most listed shares. We can see individual insiders only own 0.7%.
We generally like companies with large insider ownership. Skin in the game helps ensure the management’s motives are in line with ours. We like small-cap stocks with ~30% insider ownership and a history of owners buying on market.
JBH Shares Insider Trading:
|30 Apr 21||Buy||$85,399,312||Magellan Asset Management Limited||AU$47.42|
|22 Mar 21||Sell||$31,600,964||Magellan Asset Management Limited||AU$51.18|
|19 Mar 21||Buy||$58,564,968||BlackRock, Inc.||AU$52.60|
|05 Jan 21||Sell||$116,522,302||The Vanguard Group, Inc.||AU$52.20|
|04 Jan 21||Buy||$179,248,288||The Vanguard Group, Inc.||AU$52.96|
JB Hi-Fi Online Sales
JB Hi-Fi Group has been growing online sales. FY21 and the COVID pandemic skyrocketed online sales up 78.1%.
“The Group continued to invest in its online and digital offerings”
In FY21 total online sales across the group were $1.064 Billion dollars, representing 11.9% of the total sales.
Should I Buy JB Hi-Fi Shares: Future Prospects
The largest concern for many investors is the downfall of the brick-and-mortar consumer discretionary products industry. As retail has begun switching to online alternatives we have seen the shrinking of physical stores.
This is something that has become evident in JBH’s main competitor, Harvey Norman closing physical stores.
“We had a situation here with major shopping centres whacking up rent and big overseas chains coming in, department stores are in trouble”,Gerry Harvey
JB Hi-Fi seems to be responding well by growing its online presence.
JBH Group Focus:
Going into FY22 JB Hi-Fi has flagged its continued focus on leveraging new e-commerce platforms and online offers. They are also putting a large focus on capitalizing on BNPL providers.
Continue to integrate the in-store and online experience
In FY22 they are focussing heavily on the further expansion of the New Zealand business.
Should I Buy JB Hi-Fi Shares: Prophet’s Take
We have seen decent revenue growth from JB Hi-Fi across its three brands despite the COIVD recession and store lockdowns. Their ROE is excellent at 34.1% especially in relation to their low PE of 11x. On an earnings basis, the group seems very undervalued.
The group has no debt and has continued to grow its balance sheet. Their Net Tangible Assets per share is $2.15, representing 4.4% of the current share price. We would like to see them grown their balance sheet further.
Online sales have been strong as they continue to develop their online presence and diversify from a solely brick-and-mortar retailer.
We currently don’t hold JBH in our market-beating portfolio. But we are bullish on their future.
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