Tuesday, 12 September 2017

Boohoo.com Is Overpriced... what other options are there for my money?

Boohoo.com Is Overpriced... what other options are there for my money?

At the time of writing boohoo.com (LON:BOO) (BOO.L) is trading at 253.25p after a 0.9% rise on Monday. Can this fashion upstart be good for my bank balance?

In short I think the answer is no. The PE is now a sky high 114.5, one of the highest I have ever seen on a share. The company made just 24.22 million pounds in 2017 and 12.44 million in 2016. The reason the company is valued so highly is that some analysts think the company will explode with future earnings. However even future earnings predictions are too high anyway. It is far better to focus on the current reality of the company.

There is no dividend yield and I suspect it will be a while, if ever, before the company delivers one. The impact of a higher minimum wage and a BBC watchdog investigation are just two of the headwinds that the company must face. There is not much recent director faith in the business either with no buys in the past year and two big sales, the latest one being on the 12th June 2017 at £2.20 for nearly 25 million pounds worth of shares.

So overall I think the company is a sell. It is priced for perfection at current levels and I don’t think the company is perfect. It's got the potential to sink like a stone, which is why it's my first ever short.

A much more solid alternative is Next (LON:NXT) (NXT.L) which is currently trading at 4333p after a 0.46% fall on Monday. The PE is a reasonable 9.87 with a visible dividend yield of 3.65%. When the special dividend is taken into an account it is yielding over 6%. I would rate it a hold at this price. Dixons Carphone (LON:DC.) (DC..L) is another interesting alternative, a different play on the UK consumer with a 6.83% dividend yield.

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