1 High-Growth UK Share You Should Buy This January
Amid the ongoing e-commerce explosion I’m expecting another set of sunny financials from ASOS soon. The online-only fashion retailer is poised and ready to reveal fresh trading numbers on Wednesday, January 13.
ASOS added 3.1m customers to its books in the 12 months to August, it declared in December, taking the total to 23.4m. This helped to sweep group revenues 19% higher to £3.2bn. In August alone its websites attracted 233.4m visits, soaring from 187.1m a year earlier.
The online retail boom received a shot in the arm in 2020 as Covid-19 lockdowns forced shoppers onto the internet. News of a fresh national lockdown in Britain in recent hours bodes well for the likes of ASOS. The UK is the e-retailer’s single largest market. Rising infection rates in Europe and the US will likely lead to further sales-boosting clampdowns in these major territories too.
Levers Of Growth
I don’t believe that ASOS is just a flash in the pan though. Firstly, the e-commerce explosion is predicted to run and run long after Covid-19 has passed. Secondly, the retailer sells a broad range of products at the value end of the market, meaning sales should benefit from the broader pressure on consumers’ wallets in the short-to-medium term.
And finally, ASOS continues to invest heavily to turbocharge future earnings expansion. It is soon to break ground on a second fulfillment centre in Britain, for example, taking its total in all territories to four. And thanks to its terrific cash generation the UK share has the financial strength to keep improving its technologies and supply operations to meet the needs of its growing audience. It had net cash of £407.5m on its books as of August. This compares with net debt of around £91m a year earlier.
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A UK Share On The March
City analysts reckon ASOS’s annual earnings will slip 8% in the current fiscal year (to August 2021) due to cost issues. But this wouldn’t discourage me from investing, nor would the retailer’s conventionally-high forward price-to-earnings (P/E) ratio of around 45 times.
This UK share has a history of generating stunning annual earnings increases in recent years. And it remains on track to deliver exceptional profit growth over the long term. Therefore it’s fully worthy of such a premium rating in my book.
The ASOS share price ballooned 40% during the course of 2020. I’d buy it ahead of what could be another ripping trading update next week.