The PWR Holdings Ltd (ASX: PWH) share price is up 6.4% after the company reported record revenue and profit in its FY22 full-year results.

The auto parts design and production company released its annual report after the market close yesterday.

The PWR share price opened at $9.07 today, well up on its previous closing price of $8.80. The shares reached an intraday high of $9.44 this morning and are trading at $9.35 at the time of writing.

PWR share price spikes on record results

The key metrics of the FY22 report are as follows:

• Revenue of $101,072,000, up 27.6% on the prior corresponding period (pcp)
• EBITDA of $35,747,000, up 23.4% pcp
• Net profit after tax (NPAT) $20,843,000, up 24.1% pcp
• Operating cash flow $23,522,000, down 25% pcp
• Earnings per share (EPS) of 20.79 cents, up 24% pcp
• Final dividend of 8.5 cents full franked
• Total dividends for FY22 of 12 cents per share, up 36.4%
• Full-year dividend payout ratio of 58% of NPAT (dividend policy 40% to 60% of NPAT).

What else happened in FY22?

The company said its record profit was driven by revenue growth across all key markets and geographies. In particular, there was significant growth in third-party sales in the United Kingdom, Australia, and the United States at 35.9%, 34.1%, and 17.9%, respectively.

PWR said a 25.8% increase in organic growth and the favourable Aussie dollar also helped boost NPAT.

Revenue in the emerging technologies segment grew by 123.8% and now represents 19% of company revenue. This includes growth in the aerospace and defence market of 56% to $7.1 million.

A 65% revenue increase in the automotive original equipment manufacturer (OEM) segment occurred as “planned programs commenced production and new programs were secured”.

The new programs included Aston Martin, Valkyrie, and Rimac Nevera, according to the report.

What did management say?

PWR chair Teresa Handicott said:

PWR has delivered a strong performance in FY22. During the year, PWR increased inventories of raw materials in response to global supply chain challenges to ensure continuity of supply, reducing the EBITDA to operating cash conversion ratio.

Despite this, PWR has maintained its strong balance sheet with $21.5 million in cash at 30 June 2022 …

Founding shareholder and managing director Kees Weel said:

The benefits of our investments made in FY21 and FY22 in people, capital equipment and factory
capacity have enabled us to capitalise on growth opportunities and together with our AS9100
aerospace and defence quality and NADCAP certifications, position us well for the future.

The continued growth in Automotive OEM and emerging technology programs, together with
motorsports returning to normal racing schedules, has resulted in improved financial performance.

What’s next?

In its annual presentation, PWR notes its strategies for dealing with supply chain shortages and increasing inflation, including increasing its sale prices “where possible”.

The company said:

We have increased forward orders and inventory of raw materials to ensure continuity of supply, reducing cash from operating activities.

We have increased finished goods inventory for key programs and are warehousing these finished goods in the United Kingdom to reduce the shipping distance for the final delivery to the customer, reducing the risk of freight delays.

Increasing inflation as the global economies recover from COVID-19 and in response to the war in Ukraine will continue to put pressure on wage rates, raw material costs, supply chain costs, and other expenses.

PWR share price snapshot

Over the year to date, the PWR share price has declined by about 8%. This is a far better outcome than that recorded by the company’s home sector. The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) has fallen 15.7% in 2022 as investors worry about how rising inflation and interest rates will impact consumer spending.

Over the past month, the PWR share price has rebounded strongly by 25% as the broader market lifts.

The post PWR share price up 6% on record revenue and profit for FY22 appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended PWR Holdings Limited. The Motley Fool Australia has positions in and has recommended PWR Holdings Limited. 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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The APA Group (ASX: APA) share price is in the red today after the company revealed newly identified payroll errors will leave a $32 million impact on its financial year 2022 earnings.

A review of the company’s payroll has found errors related to seven enterprise agreements over a seven-year period.

The APA share price is currently down 1.6% on the back of the news, trading at $11.65.

For context, the S&P/ASX 200 Index (ASX: XJO) is up 0.11% right now.

Let’s take a closer look at today’s news from the energy infrastructure giant.

APA share price slumps as $32m provision incurred

The APA share price is slipping on news its upcoming earnings will take a hit from numerous payroll errors.

The company’s financial statements – set to be released on Wednesday – will include a $32 million provision resulting from the errors.

That represents an estimate of their impact over the seven years in which they occurred, including associated superannuation and interest payments to employee entitlements under all seven of the company’s enterprise agreements.

The company kicked off a review into its payroll in financial year 2021 after finding errors related to two enterprise agreements. It noted the issues were primarily due to mistaken interpretation of the enterprise agreements. Most of the provision relates to periods prior to the last financial year.

APA CEO and managing director Rob Wheals apologised for the mistake, saying:

[APA] will work expeditiously to remediate, with interest, all affected current and former employees.

The company has voluntary disclosed the initial payroll review to the Fair Work Ombudsman. It has vowed to continue to work with the ombudsman to finalise remediations and rectified errors as quickly as possible.

APA has also begun analysis of payroll data and records covering the period and enterprise agreements, engaging expert consultants to support the review.

It anticipates that will take around 12 months to complete.

The APA share price has lifted around 15% year to date and approximately 19% over the last 12 months.

The post APA share price falls as payroll errors leave $32m dint appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended APA Group. 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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The S&P/ASX 200 Index (ASX: XJO) is having a decent, if uninspiring, day of trading so far this Friday. At the time of writing, the ASX 200 has gained a tentative 0.1% at around 7,120 points. But it’s the Woodside Energy Group Ltd (ASX: WDS) share price that is really showing the ASX 200 how it’s done this Friday. 

Woodside shares are having a stellar end to the week. The ASX 200 oil share is currently up a very pleasing 4.91% at $33.74.

So how is it that Woodside shares are enjoying such a stellar end to the trading week?

Well, there’s been no new news out of Woodside itself today, or indeed this month so far. But most ASX 200 energy shares seem to have been invited to the same party.

Take the Santos Ltd (ASX: STO) share price. It’s enjoying an even better day today, currently up 6.36% at $7.52 a share. Or Beach Energy Ltd (ASX: BPT), presently up a robust 3.96% at $1.70.

This tells us that Woodside’s gains are a sector-wide trend.

Thus, we can probably conclude that these moves can be placed at the feet of the single-largest factor that influences an ASX 200 oil share like Woodside – the price of crude oil itself.

Rising oil boosts the Woodside share price

As my Fool colleague James reported this morning, oil prices are indeed enjoying some sunshine today. As we covered this morning:

WTI crude oil price is up 2% to US$89.91 a barrel and the Brent crude oil price is up 2.3% to US$95.83 a barrel. Traders were bidding oil higher after data showed that US crude stocks fell materially more than expected last week.

So it’s perhaps no surprise that energy and oil shares are booming today. Rising oil prices instantly makes oil drillers like Woodside more profitable, which, of course, is great news for investors.

This latest rise means that the Woodside share price is now up a pleasing 49% in 2022 thus far.

At the current Woodside share price, this ASX 200 energy share has a market capitalisation of $61.16 billion, with a dividend yield of 5.54%.

The post Why is the Woodside share price whizzing 5% higher on Friday? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• Woodside share price dips as oil slumps to 6-month lows
• Why is the Woodside share price sliding today?
• Why did the Woodside share price lag the ASX 200 on Monday?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Lake Resources N.L. (ASX: LKE) share price climbed as much as 8% before giving back much of its gains on Friday.

In the minutes after market open, shares in the clean lithium developer hit an intraday high of $1.285. However, as the day progressed, they dropped back and are now trading at $1.22 apiece, up 2.10%.

Let’s take a look at what news is surrounding the company today.

What happened to Lake Resources?

The broader S&P/ASX 300 Metals and Mining Index (ASX: XMM) is also enjoying gains today.

The benchmark index representing a number of companies that produce gold, steel and/or precious metals is currently up 1.18%.

While the Lake Resources share price may be outperforming its sector today, it appears investors have been taking a breather on the company this week.

Lake Resources shares have gained 94% over the past month, but have ended the last three sessions before today in the red.

However, one positive development is providing support across the sector.

As reported by The Age, the federal government is looking at ways to remove barriers that could see car manufacturers supply more electric vehicles to Australia.

Volkswagen Australia managing director Paul Sansom was “struggling to convince his parent company to supply more vehicles under the existing regime”, according to the report.

Climate Change and Energy Minister Chris Bowen will be discussing fuel efficiency standards at a national electric vehicle summit on Friday.

He will talk about how “existing fuel efficiency standards are limiting freedom of choice in the market because they create a barrier to the wider adoption of vehicles that do not need petrol or diesel”.

Lake Resources has an aspirational target of developing a production capacity of 100,000 tonnes of lithium carbonate annually by 2030.

If Australia overhauls the current fuel efficiency standards, this could bode well for the lithium industry.

It would mean that consumers would get greater access to popular new electric vehicle models.

As part of its bid to reach this production target, Lake Resources today announced the appointment of experienced mining company commercial executive Sean Miller to the new position of corporate development officer. It will be his aim to fast-track development activity across Lake’s three brine projects in the Jujuy Province of Argentina.

Lake Resources share price snapshot

After hitting a year-to-date low of 58.5 cents on 15 July, the Lake Resources share price has zipped 105% higher.

Based on today’s price, Lake Resources presides a market capitalisation of roughly $1.76 billion.

The post Why did the Lake Resources share price pop and then stop on Friday? appeared first on The Motley Fool Australia.

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• Why Blackmores, Codan, Lake Resources, and Xero shares are falling today
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• Why is the Lake Resources share price sinking 8% on Wednesday?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Aristocrat Leisure Limited (ASX: ALL) is an S&P/ASX 200 Index (ASX: XJO) share that might divide some opinions.

Ethical, social and corporate governance (ESG) investing is certainly one of the most potent trends to emerge in the investing world in recent years.

Investors are ever more conscious of where their hard-earned money is going and what it is funding. And increasingly, investors want to invest their capital (inside super or out) into companies that align with their values.

And for many investors, this doesn’t include gaming companies like Aristocrat, given the company is a well-known manufacturer of poker machines.

But many other investors love the types of companies that dwell on the fringes of the ESG arena. Gambling, drinking and smoking, for example, may be considered morally grey industries by some.

But they also provide what other investors might describe as a ‘recession-proof’ earnings base, considering the ‘fondness’ many customers have for them.

So is Aristocrat Leisure a morally questionable company, or could it be a recession-proof buy today (or both?

Well, loath of being a moral arbiter in this arena, let’s outsource this question to Ben Clark of TMS Capital, and Henry Jennings from Marcus Today. Both recently sat down for an interview at Livewire.

A guilty buy today?

When asked if Aristocrat was a buy right now, both experts agreed. Here’s what Jennings had to say first up:

Apart from the moral aspect of pokie machines which I struggle with, I think Aristocrat is a buy. At the end of the day, no matter what happens in the economy, people like to hope and they like to put money into pokie machines and online gaming because it’s a distraction.

A distraction from everyday woes and there’s that hope that you’re going to hit the jackpot. And even in a recessionary environment, it is relatively safer than some of the other stocks that are out there.

Clark agreed, here’s what he added on the matter:

I’m going to go a buy as well. Look, I think it’s interesting because the ‘crown jewel’ is now the US land-based business. And that continues to trade very strong despite all these concerns about a recession going to what Henry’s talking about there.

A very strong result in May, well ahead of every analyst’s expectations. There’s earnings momentum. The big issue for this company is it’s got too much cash on its balance sheet. It did a big raising to fund an acquisition that never played out, but to me, that’s a pretty good problem to have. It’s not the biggest problem. I’ll go buy.

So that’s fairly unequivocal for Aristocrat. Of course, if gaming and gambling are anathemas to any investor, no one is forcing anyone to buy Aristocrat. But for other investors that perhaps do not consider ESG considerations important or effective, these opinions might be worth considering.

Aristocrat share price snapshot

The Aristocrat Leisure share price has had a pleasing end to the week so far this Friday. The ASX 200 gaming company has gained 0.52% at the time of writing to $36.44 a share.

At this share price, Aristocrat Leisure has a market capitalisation of $24.23 billion, with a dividend yield of 1.43%.

The post Is this ASX 200 share ESG-challenged or a recession-proof buy? appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The S&P/ASX 200 Index (ASX: XJO) is climbing 0.13% today, but ASX 200 coal shares are outperforming the index.

The Whitehaven Coal Ltd (ASX: WHC) and New Hope Corporation Limited (ASX: NHC) share prices are both lifting today.

Let’s take a look at what is going on with ASX coal shares today.

Coal prices lift

Whitehaven shares are rising 7.36% today, while New Hope shares are lifting 6.12%. Meanwhile, ASX All Ordinaries share Yancoal Australia (ASX: YAL) is lifting 5.41%.

The thermal coal price held steady overnight at US$413.90 a tonne, according to ANZ research. Meanwhile, the coking coal futures lifted 2% to US$250 per tonne.

In a report compiled by ANZ senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari, the authors noted coal prices “face upward pressure” due to European demand. Analysts said:

An impending energy crisis in Europe is likely to switch power utilities from gas to coal, this could increase competition for seaborne coal.

Overnight, European natural gas hit a record high amid supply shortages.

Thermal coal has lifted nearly 4% in the past month, while it has surged 142% in the past year. Coal prices are forecast to remain high amid the Eastern European war, according to trading economics. Europe is turning to seaborne coal from South Africa, Indonesia and Australia.

Yancoal reported record revenue and earnings in FY22 results released yesterday. The company noted this result was driven by the higher coal prices. Yancoal predicted thermal coal prices will “remain high” in 2023. The company said:

Ongoing supply-side constraints and demand resulting from shortages and disruption to global energy markets should sustain elevated prices for seaborne thermal coal into 2023.

ASX coal share recap

The Whitehaven share price has exploded 237% in a year, while New Hope has surged 156%.

Meanwhile, the Yancoal share price has exploded 130% in a year.

In comparison, the ASX 200 has lost about 5% in the past year.

The post Why are ASX 200 coal shares having another cracker of a day? appeared first on The Motley Fool Australia.

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• 3 ASX 200 shares inking new multi-year highs today
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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Cochlear Limited (ASX: COH) share price is in the green on Friday following the release of the company’s financial year 2022 earnings.

The implantable hearing devices giant’s stock opened today’s session at $214.65, representing a 0.2% gain before slipping to its intraday low of $213 – a 0.5% dip. Fortunately, it pushed past early uncertainty to lift to a high of $223.48 – a 4.33% increase.

Since then, it’s settled slightly to trade at $222.85. That represents a 4.04% improvement.

Let’s take a closer look at how the company performed in financial year 2022.

Cochlear share price lifts as profit and dividends rise

The Cochlear share price is on a roll after the company revealed $277 million of underlying profit and even stronger guidance.

As The Motley Fool Australia reported this morning, it also announced a $1.45 final dividend, bringing its total financial year 2022 dividends to $3. That marks an 18% year-on-year improvement.

Finally, the company expects its profit to lift up to $305 million – the high-end of its guidance – this financial year. That would represent a 10% year-on-year increase.

But that hasn’t been enough to please brokers.

How have brokers responded?

Macquarie’s David Bailey said the company’s profit missed the consensus estimate by 3% while its outlook missed by 2%, The Australian reports. Bailey was quoted as saying:

Overall, a slight miss to consensus expectations and our forecasts for FY23 … However, we see the launch of the Nucleus 8 to be a key focus – we are looking for details in relation to differences relative to the N7 functionality and size.

Wilsons is also disappointed by the company’s guidance. It said the market expected a top line of $310 million, the Australian Financial Review (AFR) reports. The broker said, courtesy of the publication:

The guidance reflects higher expenses related to cloud computing upgrades and market preparation for a new sound processor launch. The long-awaited launch of Nucleus 8 Processor is an important leading indicator for Cochlear implant volumes.

The Cochlear Nucleus 8 Sound Processor (N8) achieved CE Mark approval this month. Commercial availability of the technology will kick off in Europe over the coming months. It’s expected to launch in other markets later this year, subject to regulatory approvals. Wilsons was quoted as saying:

We assess N8 cycle will commence … with [around] 30% larger recipient base than the N7 cycle and can support 13% to 15% Services revenue [compound annual growth rate (CAGR)] over the next four years.

On that note, the broker is said to remain positive on the stock. It previously had a $235 price target and an overweight rating on Cochlear shares.

The post Cochlear share price takes off despite guidance miss appeared first on The Motley Fool Australia.

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• Cochlear share price in focus as sales revenue surges to record $1.6b
• Earnings preview: Here’s which ASX shares are reporting today
• 5 things to watch on the ASX 200 on Friday
• 2 blue chip ASX 200 shares tipped as buys by experts
• Experts name 3 ASX 200 shares to buy now

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Macquarie Group Limited. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

While U.S. stocks have generated incredible returns for many decades and investors the world over want to invest in the stocks of leading U.S. companies, U.S.-based investors can also benefit from investing in top foreign companies as well.

Investing in international companies can help investors diversify their portfolios geographically, help them tap into the explosive growth of emerging markets and other developing economies, and sometimes own shares of companies at less expensive valuations than are typically seen in the United States.

Here are three great foreign companies that U.S. investors can buy now.

1. MercadoLibre 

MercadoLibre (NASDAQ: MELI) is Latin America’s leading e-commerce platform, as well as an emerging force to be reckoned with in fintech and payments. While U.S. investors don’t hear as much about Latin America as they do about China in terms of massive growth opportunities, the Latin American market collectively has enormous potential in its own right.

For example, Brazil, where MercadoLibre derives much of its revenue, has a burgeoning population of over 200 million people and the world’s ninth-highest gross domestic product (GDP). Mexico, another key market for the company, has a population of over 125 million and ranks 11th in GDP. This gives you an idea of the vast potential that lies ahead of MercadoLibre.

And this isn’t just a story about potential — the company is firing on all cylinders right now. In its most recent quarter, MercadoLibre posted scintillating year-over-year revenue growth of 57% (to $2.6 billion).

This was impressive at surface level but even more astounding when considering that it was contending with inflation and a stagnating macro economy, while lapping a quarter that included significant tailwinds from the pandemic. The company also increased total payment volume by 84% and gross merchandise volume on the platform by 26% while growing net income.

MercadoLibre is one of the top holdings in my portfolio and a compelling way to invest in growing e-commerce and online payment adoption in Latin America with a well-run company that is executing on all fronts.

2. CD Projekt 

Let’s head from South America to Europe, and Poland specifically, for this next top international stock: video game publisher CD Projekt (OTC: OTGL.Y). With titles like Cyberpunk 2077 and the Witcher series, the company is establishing a nice foothold for itself in what is estimated to be a $218 billion market globally by 2024.

With a market cap of $2 billion, CD Projekt has plenty of runway ahead in this burgeoning industry. The stock is down 58% over the past year, and its flagship Cyberpunk 2077 game sold well but received criticism for its bugs and glitches. But these situations can also make for an opportunistic entry point for investors.

The company announced a partnership with Epic Games that will enable it to use Epic’s coveted Unreal Engine, which should help it to avoid these types of issues and to “continue creating powerful, open-world RPGs [role-playing games].” An anime series called Cyberpunk: Edgerunners will be launching on Netflix (NASDAQ: NFLX), which could help to rekindle interest and broaden the game’s appeal.

What I really like about CD Projekt is that the joint CEOs, Adam Kiciński and Marcin Iwiński, have built the company themselves and have been there for a very long time — 28 years each. Not only that, but they have a lot of skin in the game as Iwiński owns 13% of the company, Kiciński owns 4%, and in total they and other founders and board members own 34% of shares.

I like the longevity and the fact that the people who helped to build the company from scratch are still there and invested for the long term. CD Projekt also pays out a small dividend.

With strong leadership and some success in a massive global market, the company looks like another top international company for investors to consider. U.S. investors can buy its American depositary receipt, or ADR.

3. Canadian Natural Resources 

Not all top foreign companies need to work on cutting-edge video games or create the future of commerce, and U.S. investors don’t always need to look far from home to find them. Take Canadian Natural Resources (NYSE: CNQ), one of Canada’s top producers of oil and natural gas, for example. The $63 billion company has a strong presence in Alberta’s oil sands, as well as operations in Great Britain’s North Sea and offshore assets in Africa.

Management has a strong commitment to creating value for shareholders on a per-share basis, and it has smartly used 2022’s increase in oil prices to pay out dividends and repurchase shares. The stock currently yields just over 4%, and the company also recently stated that, thanks to its strong performance and execution this year, it is rewarding shareholders with a special dividend of $1.50 Canadian dollars ($1.17) per share, which will be payable to shareholders of record as of Aug. 23.

This March, the company also enacted a large share buyback authorization in place that allows it to buy back about 10% of its public float by March 2023. Even after a 33% gain year to date, shares of Canadian Natural Resources still look attractive at just seven times earnings. All in all, it has world-class assets, a strong commitment to shareholder value and returning capital to shareholders, and an inexpensive valuation.

U.S. stocks are great, and there is also a world of opportunity outside of the United States for investors who want to diversify their portfolios and gain exposure to new markets and different valuations. Investing in top foreign companies like the three above is a great way to get started.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 great foreign companies to invest in right now appeared first on The Motley Fool Australia.

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Michael Byrne has positions in MercadoLibre. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended MercadoLibre and Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Kogan.com Ltd (ASX: KGN) share price has risen rapidly over the past month. At yesterday’s close, Kogan shares were up a whopping 40%.

Shares in the online retailer are dragging 3% today, and of course, they’re still down around 55% in 2022, but the recent rally of Kogan shares has helped it regain quite a bit of the lost ground.

In fact, since mid-July, the Kogan share price has risen by around 45%.

What’s happened?

On 28 July 2022, Kogan announced a business update that appears to have excited investors.

One of the first things the company told the market was that it had returned to positive quarterly adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) after a “successful ongoing recalibration of operating costs”.

This is likely a big deal for investors because a profit-making company is obviously more attractive than a loss-making business seemingly going backwards.

As a reminder, in the FY22 third quarter, Kogan said that its gross sales fell 3.8% (year over year) to $262.1 million. Adjusted EBITDA sank 110.5% to a loss of $0.8 million.

Kogan turns things around

While the FY22 fourth quarter was not exactly Kogan getting back to the best of the e-commerce boom during the COVID pandemic stage, a bounce back to underlying profit at the adjusted EBITDA level could be a good first step.

Kogan managed to grow its FY22 gross sales by 0.1% to $1.18 billion. Adjusted EBITDA profit did fall by 69% over the year, but Kogan management thinks there could be a boost for the business in the current environment.

CEO and founder Ruslan Kogan said:

Times are changing. In uncertain times, people don’t want to alter their lifestyle but they are happy to shift the way they shop. We know that in an environment where great value becomes even more important, Kogan serves an important need.

Our business was built for this. Efficiency and speed has been at the core of how the Kogan.com team operates for 16 years now.

We’re not resting on our laurels though. We are making the business leaner to enable us to pass on cost efficiencies to customers in the form of lower prices. A leaner company means we discontinue parts of the business that are not delivering value to customers or shareholders, and also gives us the flexibility to respond to significant ongoing changes in the macro environment.

My take on the Kogan share price

For Kogan shareholders – I’m not a shareholder – it has been encouraging to see the business regain some sentiment and regain a bit of profitability.

It’s hard to say what happens next in the short term. The economy ‘reopening’ after COVID-19 lockdowns and the current economic climate (of rising interest rates and inflation) have made things tricky.

The situation of having too much inventory was also a negative, though Kogan seems to have largely worked through that now. It’s also taking legal action against one of its logistics operators.

I think Kogan has the building blocks for being able to achieve good results in the future – a wide array of products, a strong customer base (Kogan First members grew 210% in FY22 to 372,000), the ability to generate operating leverage (as seen in previous financial years) and a desire to grow into new areas that could help growth, such as telecommunications, insurance and New Zealand.

If Kogan can improve its profit margins, then investor sentiment could grow even further.

The post Up 40% in a month, is it true ‘times are changing’ for the Kogan share price? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Kogan.com ltd. The Motley Fool Australia has positions in and has recommended Kogan.com ltd. 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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Investors in Fortescue Metals Group Limited (ASX: FMG) shares may increasingly be looking at what’s going on with Fortescue Future Industries (FFI). It does have some big aspirations. But, there’s a major factor that could impact how much FFI can pursue its goals.

When a business has major plans, it comes with a sizeable price tag. Money doesn’t just appear out of nowhere.

So, how can Fortescue run its normal business and grow FFI?

The strategy that management has employed is that its capital allocation framework includes an allocation of 10% of net profit after tax (NPAT) to fund FFI.

For example, in FY21, Fortescue generated net profit of US$10.3 billion. That allowed Fortescue to allocate US$1 billion to FFI, with an expenditure of US$122 million in FY21.

In FY22, FFI’s total expenditure was US$534 million, including US$148 million in capital expenditure and US$386 million in operating expenditure.

The miner is expecting FY23’s anticipated expenditure as between US$600 million to US$700 million, including US$100 million of capital expenditure and US$500 million to US$600 million of operating expenditure.

What will impact the Fortescue Future Industries dream?

Fortescue has committed to putting a specific percentage of its net profit each year into FFI.

But, there’s no specific dollar amount because Fortescue’s profit can be significantly variable.

Fortescue is one of the world’s largest iron ore miners. Its profit is heavily influenced by the iron ore price.

A commodity business generates revenue from how much of the commodity it produces and the price of that commodity.

It costs Fortescue roughly the same amount to mine a tonne of iron whether the iron ore price is US$10 higher per tonne or US$10 lower per tonne. Of course, it does have to pay a bit more to the government if the iron ore price is higher.

Fortescue’s net profit in FY21 was US$10 billion for the full year. So far, in FY22, investors have heard that the first six months to 31 December 2021 generated US$2.8 billion of net profit. We’ll soon hear about how the business performed in the second half and for the full year of the 2022 financial year. Of course, this will then influence how much Fortescue will allocate to FFI.

FFI has been spending less money than what it has been allocated.

With China being a key buyer of iron ore, it will have a major influence on Fortescue’s profit and therefore how it can progress with FFI.

What is it spending the money on?

It is doing a number of different things – it’s taking a global leadership position in green energy and technology and wants to get to the point where it can produce millions of tonnes of green hydrogen annually.

One of the first steps is that Fortescue Future Industries has advanced the construction of the 2GW capacity electrolyser manufacturing facility at the green energy manufacturing centre in Gladstone, Queensland.

It’s also advancing plans in a number of countries to produce and supply green hydrogen. For example, it recently entered into a memorandum of understanding (MoU) with Firstgas Group to identify opportunities to produce and distribute green hydrogen in New Zealand.

Fortescue share price snapshot

Over the past month, Fortescue shares have risen by around 14%

The post 1 factor that could drag on Fortescue Future Industries’ green dream appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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