Kogan share price rockets 12% to a record high: Is it too late to invest?

One of the best performers on the Australian share market on Tuesday was the Kogan.com Ltd (ASX: KGN) share price.

The ecommerce company’s shares rocketed a sizeable 12% higher to finish the day at a record high of $22.99. This means that the Kogan share price is now up 566% from its March low of $3.45.

To put that into context, if you had invested $20,000 into Kogan’s shares at its low, it would now be worth over $133,000.

Why did the Kogan share price rocket higher today?

Investors appear to have been fighting to get hold of Kogan’s shares following a delayed response to its impressive full year results release on Monday.

For the 12 months ended 30 June 2020, Kogan reported a 39.3% increase in gross sales to $768.9 million. A key catalyst for this growth was a 35.7% increase in its active customer base to 2,183,000.

Another positive was its 4.7 percentage point increase in its gross margin to 25.4%. This was underpinned by the growth in commission-based and seller-fee-based revenue across new verticals and Kogan Marketplace.

As a result of this margin expansion, Kogan’s earnings grew at an even quicker rate. Despite a big investment in marketing, Kogan reported a 57.6% increase in adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) to $49.7 million.

This strong form allowed Kogan to declare a fully franked final dividend of 13.5 cents per share. This was up 64.6% on the prior corresponding period and brought its full year dividend to 21 cents per share. Which means that investors that bought shares at $3.45 in March will receive a 6% yield on cost.

Positive start to FY 2021.

Also getting investors excited was Kogan’s strong start to FY 2021.

In July, Kogan achieved unaudited gross sales growth of over 110% and gross profit growth of over 160%. It also revealed that its monthly adjusted EBITDA was more than $10 million during the month.

Annualised, this equates to more than $120 million of adjusted EBITDA, which is over 140% greater than FY 2020’s adjusted EBITDA of $49.7 million.

Is it too late to invest?

Kogan’s shares are now trading at a significant premium to the market average. This means they carry higher than average risk, which may make them unsuitable for many investors.

However, if your risk profile allows it, I feel Kogan could be an excellent long term investment. Though, better entry points may present themselves in the coming months, so it could pay to be patient.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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