The Woolworths Group Ltd (ASX: WOW) share price has been trending strongly, marking an all-time record high of $44.06 on Friday 20 August.

The supermarket sector has likely benefited from recent lockdowns, driving an increase in in-house consumption.

According to the Australian Bureau of Statistics, the latest Australian retail turnover figures for June flag a 1.8% month-on-month decrease. Within those figures, food retailing rose 1.5%, supported by subgroups including supermarkets and grocery stores, other specialised food retailing, and liquor retailing.

A similar narrative occurred during the February earnings season, with localised COVID-19 outbreaks driving volatility in business.

Let’s take a look at how the Woolworths share price performed following its 1H FY21 results.

How did Woolworths perform in 1H FY21?

Following the release of its 1H FY21 results in February, the Woolworths share price closed 1.05% higher at $33.46.

The company delivered strong sales growth across all business segments – with the exception of hotels – with record Christmas trading. Highlights include:

• Group sales up 10.6% to $35,845 million
• eCommerce sales surging 77.9% to $2,937 million
• Group earnings before interest and tax increased 10.5% to $2,092 million
• Group net profit after tax up 15.9% to $1,135 million
• Dividend per share increasing 15.2% to 53 cents per share

Management flagged a moderation in sales for the rest of the financial year, saying, “we expect sales to decline over the March to June period compared to the prior year in all our businesses.”

“However, in parallel, we also expect COVID-related costs to be materially below the prior year, subject to no further widespread prolonged lockdowns.”

The topic of moderating sales would emerge in Woolies third-quarter update on 29 April, where the company flagged a 0.4% increase in group sales to $16,566 million. The Woolworths share price would tumble 3.86% to $33.72 on the day of the announcement.

Woolworths share price snapshot

The Woolworths share price has rallied 22.1% year to date.

Shares in the supermarket giant have performed strongly following the $10 billion demerger of its Endeavour drinks business in June.

The demerger will return $1.6 billion to $2 billion in cash to Woolworths shareholders via dividends. This could be something to keep an eye out for in the company’s upcoming FY21 result.

The post How did the Woolworths (ASX:WOW) share price perform last earnings season? appeared first on The Motley Fool Australia.

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Motley Fool contributor Kerry Sun 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 Bruce Jackson.

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The Iluka Resources Ltd (ASX: ILU) share price is one to watch this morning after the Aussie miner reinstated its interim dividend in its latest half-year results release.

Iluka’s dividend announcement

Key highlights from this morning’s half-year results to 30 June 2021 (1H21) include:

• Mineral sands revenue up 61% on the prior corresponding period (pcp) to $735.6 million
• Mineral sands earnings before interest, tax, depreciation and amortisation (EBITDA) up 69% on pcp to $299.2 million
• Underlying group EBITDA up 37% on pcp to $308.2 million
• Net profit after tax (NPAT) up 14% on pcp to $129.0 million
• Free cash flow up 288% on pcp to $179.3 million
• 12.0 cents per share interim dividend (no interim dividend paid in 1H20)

What happened in FY21 for Iluka?

A significant increase in sales volumes was a key driver of the latest result with demand returning to pre-pandemic levels. Mineral sands sales volumes surged to 177 kilotonnes (kt) in the first half with weighted average prices edging higher.

Chinese tile production returned to pre-pandemic levels while demand from the photovoltaic (solar) industry maintained the push for fused zirconia. Titanium sales were also strong despite supply concerns persisting.

Investors will be watching the Iluka share price following this morning’s result. Iluka reported that Australian operations returned to maximum settings during the year after a period of inventory management as the company continues to progress its development pipeline of projects.

What did management say?

Iluka CEO and managing director Tom O’Leary had the following to say this morning:

Iluka commenced 2021 in a strong position and we have built on that platform to deliver an excellent first half result.

The company demonstrated discipline during 2002, including our initial response to the COVID-19 pandemic. That discipline continues to underpin our broader approach, albeit now in different and evolving circumstances.

As we look to the second half and beyond, Iluka is positioned to lead in the response to market and industry conditions by deploying its operations, product suite and development pipeline.

What’s next for the Iluka share price?

There was no full-year guidance noted in today’s half-year results update from the Aussie resources company. The focus remains on inventory and balance sheet management as well as progressing key projects on schedule.

The Iluka share price is up 37.5% in 2021, well ahead of the S&P/ASX 200 Index (ASX: XJO).

The post Iluka (ASX:ILU) share price on watch as interim dividend returns appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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 Bruce Jackson.

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The Afterpay Ltd (ASX: APT) share price will be on watch this morning.

This follows the release of the buy now pay later (BNPL) provider’s full year results for FY 2021.

Afterpay share price on watch after delivering more strong growth

• Underlying sales grew 90% (or 102% in constant currency) to $21.1 billion
• Total income up 78% (or 89% in constant currency) to $924.7 million
• Gross loss to underlying sales ratio flat at 0.9%
• Net transaction loss up 210% to $132.6 million
• EBITDA down 13% to $38.7 million
• Active customers increased 63% to 16.2 million
• Active merchants up 77% to 98,200
• Square-Afterpay transaction on track to complete in Q1 of calendar year 2022

What happened for Afterpay in FY 2021?

For the 12 months ended 30 June, Afterpay was on form again and delivered stellar underlying sales growth of 90% to $21.1 billion. In constant currency, its underlying sales would have doubled year on year.

This was driven by growth across its ANZ, Clearpay, and North America operations. The latter was arguably the highlight, delivering a 146% increase in underlying sales to $9.8 billion for the year. This was complemented by a 44% jump in ANZ underlying sales to $9.4 billion and a 227% jump in Clearpay underlying sales to $1.8 billion.

This sales growth was underpinned by increased repeat use and further strong customer growth. In respect to the latter, active customers grew 63% year on year to 16.2 million. Once again, the North America business was the highlight, delivering an 88% jump in active customers to 10.5 million. This was supported by a 104% increase in Clearpay customers to 2.1 million and a modest 8% lift in ANZ customers to 3.6 million.

In respect to repeat use, the company notes that in its most established ANZ region, the top 10% of consumers are now using Afterpay more than 60 times per year. Positively, it notes that international regions continue to follow the ANZ trajectory with both North America and Clearpay recording increases in consumer frequency during the period. This led to approximately ~93% of FY 2021 underlying sales coming from repeat customers.

Afterpay’s net transaction loss for the year came in at 0.6% of underlying sales. This was up from 0.4% a year earlier, which reflects a lower contribution of late fees from customers. Late fees contributed less than 10% of Afterpay’s total income, down from 14% in FY 2020 and 19% in FY 2019. Late fees now represent less than 0.4% of underlying sales.

What did management say?

Afterpay’s Chair, Elana Rubin AM, continues to see a bright future for the company, particularly given the demise of credit cards.

She commented: “Global research continues to indicate that credit cards and credit-based products are in decline, while BNPL continues to expand as a preferred way to pay. Millennials and Gen Z are less likely than their parents to use a credit card, and more likely to engage with organisations and brands that they trust. These factors underpin the important role that Afterpay now plays in social and economic empowerment.”

Rubin also notes that the company is aiming to support and enhance financial inclusion for younger women.

Afterpay’s Chair explained: “The forthcoming launch of the Money by Afterpay product is a great example. This is a testament to the skill and innovation of the team in bringing a new and inclusive financial product to life. It also signals our commitment to supporting and enhancing financial inclusion, particularly for younger women.”

“Data shows that female engagement with financial services is comparatively low, but they are seeing that this issue is theirs to solve. This demographic has seen several societal shifts during the past 20 years, and yet less than a third of women have been taught about investing, and the wage and superannuation gaps remain.”

“These same women make up the majority of the Afterpay consumer base. They want a sensible way to afford discretionary items, using their own money, and greater financial empowerment. Money by Afterpay will make money management simple and frictionless for these consumers, as they improve their financial literacy, grow their wealth, and ultimately secure future life goals by saving alongside responsible spending,” Rubin said.

What’s next for Afterpay?

As you might have seen recently with the rampant rise by the Afterpay share price, the company is in the process of being acquired by US payments giant Square. This morning the company confirmed that the transaction is expected to complete in the first quarter of calendar year 2022.

But management isn’t resting on its laurels and continues to work on its bold growth plans.

This includes expanding its in-store cards offering beyond the ANZ and the US markets and into the UK market in the second quarter of FY 2022.

In addition, the company intends to enhance its merchant value proposition with the launch of Afterpay iQ in September. This is a new merchant insights platform that combines artificial intelligence, machine learning, and data science to provide merchants with deep consumer insights to optimise their marketing investment.

The Afterpay share price is up 46% year on year.

The post Afterpay (ASX:APT) share price on watch after reporting 90% sales growth appeared first on The Motley Fool Australia.

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Motley Fool contributor 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 and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Flight Centre Travel Group Ltd (ASX: FLT) share price has been on fire in August. Shares in the Aussie travel share have rocketed 5.6% higher in the last month amid the latest ASX reporting season.

Let’s take a look at how the Flight Centre share price has responded in previous earnings periods.

How did the Flight Centre share price fare in February?

Given ASX companies generally report half-yearly, there are two major reporting seasons: February (for 31 December year end) and August (for 30 June year end).

Flight Centre reported its half-year earnings on 25 February 2021. Some of the key takeaways from that result include:

• $1.9 billion (c.70%) reduction in annualised costs
• 12% increase in total transaction value (TTV) to $1.5 billion
• 10.4% revenue margin, down from 12.5% in 1H 2020
• $247 million underlying loss

The Flight Centre share price climbed higher following February’s result. That helped the Aussie travel share surge 18.0% higher from the end of January to the market close on Friday 26 February.

And last August?

Investors can also see what happened last August. Flight Centre released its full-year results for the period ended 30 June 2020 (FY20) on 27 August in a COVID-disrupted year for the travel industry.

As a refresher, Flight Centre’s results were headlined by the below:

• $510 million underlying loss before tax (down from $343.1 million profit in FY19)
• $1.9 billion cash balance after increasing liquidity by $1.1 billion
• 36% decline in TTV to $15.3 billion after minimal sales from March to June year end

The Flight Centre share price was volatile last August without any major share price swings following the result.

Foolish takeaway

Shares in the ASX travel agent were up 6.66% to $15.22 yesterday as investors eyed easing restrictions as vaccination numbers surge.

Investors will likely be watching the Flight Centre share price closely ahead of tomorrow’s FY21 results release.

The post What happened to the Flight Centre (ASX:FLT) share price last earnings season? appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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 recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the S&P/ASX 200 Index (ASX: XJO) still hovering at record highs this results season, investors may have to turn to lesser-known businesses for a bargain on the way up.

Fairmont Equities managing director Michael Gable told his clients that he has an optimistic outlook for Australian shares.

“In the last few days, we have once again seen the US markets come back to the 50-day moving average and bounce off it, which means that the uptrend remains in place for now,” he said.

But Fairmont reported 2 specific smaller-cap ASX shares that it is especially positive on:

Can Genworth deal with a potential break-up of a 50-year relationship?

Genworth Mortgage Insurance Australia Ltd (ASX: GMA) is in the business of providing lenders’ mortgage insurance for home loans.

This ASX share holds a field-leading 31% share of the market, according to Fairmont’s The Dynamic Investor report.

Its results this month exceeded expectations.

“Underlying net profit after tax (NPAT) for the six months to 30 June 2021 (1H21) was ahead of market expectations and underpinned by better-than-expected underwriting profit, which was driven by lower net claims incurred (-51%).”

One current risk spooking potential investors is that its contract with Commonwealth Bank of Australia (ASX: CBA) is up for renewal. 

While Genworth has enjoyed a 50-year relationship with the banking giant, there is no absolute guarantee that would continue.

The stock dropped from around $2.80 in mid-June to $2.26 on Tuesday afternoon.

Gable’s team reckons the current price is worth it even if the CBA deal is lost.

“At current levels, the market appears to be heavily discounting the shares relative to its adjusted NTA [net tangible assets] should the CBA contract be lost, with the price/NTA ratio well below the usual range,” the Fairmont report read.

“On an ‘as is’ basis, the fundamentals are improving. In particular, GMA’s improving profitability, strong reserving (which was increased in 1H21) and strong capital position leaves it well-positioned to deliver strong shareholder returns.”

Genworth shares typically trade between 20% to 40% discount to NTA, according to Fairmont.

“Short interest in GMA has been declining materially since January 2020 and now sits at [approximately] 1%.”

Can Imdex join the big boys?

Imdex Limited (ASX: IMD) is a technology and equipment provider for the mining industry.

“The company has a strong market presence on 70% of mineral drilling projects globally and generated sales in over 100 countries,” reported Fairmont. 

“Imdex directly supports 18 of the top 50 mining companies globally and has long-standing relationships with most of the top drilling clients.”

The company’s financial results this month showed earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin shot up to 28.5%.

Imdex declined to provide future guidance. However, Gable’s team suspects financial year 2022 “appears likely to be another year of strong growth”.

Imdex shares are up more than 34% for the year. However, they have dipped from $2.49 earlier this month to $2.30 as of Tuesday afternoon.

“The shares are currently trading on a 1-year forward P/E multiple of [approximately] 23x, which we do not consider to be demanding in the context of earnings per share growth of 15% over FY21-24 on a CAGR [compound annual growth rate] basis.”

But for those buying in now, the biggest uplift could come from a trigger that is completely unrelated to anything Imdex itself does.

“Inclusion in the S&P/ASX 200 Index is a potential catalyst for the shares.”

The business has a market capitalisation of around $900 million. The smallest company in the ASX 200 is Perseus Mining Limited (ASX: PRU), with a market cap of $1.89 billion.

The post 2 cheap ASX shares now ready to take off appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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 Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price has gone up by 30% in the 2021 calendar year to date. Is it still an opportunity, or has the easy money been made?

Before we get to the opinion on Telstra shares, let’s look at the telco’s FY21 result which was filled with interesting information about the prior year.

Telstra’s FY21 result

When the telco announced its report it said that it had achieved a turning point in its financial performance and that it was building momentum towards growth.

On a reported basis, total income decreased by 11.6% to $23.1 billion. Net profit after tax (NPAT) rose by 3.4% to $1.9 billion.

Looking at underlying earnings before interest, tax, depreciation and amortisation (EBITDA) on a guidance basis, it decreased 9.7% to $6.7 billion. This included an in-year NBN headwind of around $650 million and an estimated $380 million financial impact from COVID. Excluding the in-year NBN headwind, underlying EBTIDA in the year declined by around $70 million.

Management have been focused on delivering T22 for a few years. Telstra has completed or is on track to achieve around 80% of its T22 scorecard metrics.

Costs and improving productivity is one area of focus. Total operating expenses declined by 10.2% for the year. Underlying fixed costs declined by $490 million, or 8.1%. Since FY16, the company has achieved around $2.3 billion of net productivity and remains on track to meet its target of $2.7 billion by the end of FY22. It has reduced net full-time roles by around 8,300 and removed on average more than four management layers.

Another area that may be impacting the Telstra share price is its monetisation strategy.

Sell-down of assets

The separation and sale of its 49% stake of InfraCo Towers is expected to be completed by the end of August. This transaction values Telstra’s InfraCo Towers at $5.9 billion. But the telco also gets to keep control of the business, whilst having partners like the Future Fund and Sunsuper as part of the InfraCo Towers.

The company had previously suggested that it would return about half of the net proceeds.

Telstra has announced an on-market share buy-back of up to $1.35 billion to return some of this capital to shareholders and maximise value.

Is the Telstra share price a buy today?

Plenty of brokers still think so.

For example, Morgans rates Telstra shares as a buy with a price target of $4.34. That implies a potential rise of around 10% over the next 12 months.

The broker noted that the mobile business is producing growth and this may continue for the next 12 months.

There could be more earnings growth to come and the telco industry environment appears to be improving for Telstra.

Telstra is expected by Morgans to pay a fully franked dividend yield of $0.16 per share in both FY22 and FY23. That translates to a grossed-up dividend yield of 5.8%.

The post Is the Telstra (ASX:TLS) share price a buy today? 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 no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Insurance Australia Group Ltd (ASX: IAG) share price has moved sideways over the past year. No doubt, COVID-19 has thrown some serious challenges to the insurance giant, impacted by significant one-off corporate expenses.

However, management remains focused on correcting these issues and delivering bottom-line growth.

At Tuesday’s market close, IAG shares finished the day up 1.31% trading at $5.42.

How is the IAG share price tracking in 2021?

In 2021, IAG has posted share price gains of 15%. This comes off the back of its strong surge in August, rising 10% in the past month alone.

Investors were clearly buying the company’s shares ahead of its full-year results, expecting good things to come out of IAG.

IAG chief executive Nick Hawkins commented:

Our fiscal 2021 business performance is sound and reflects the strength of our core insurance business and its market leading brands.

Our Australian and New Zealand direct businesses have generated solid growth, and we’ve enhanced our focus on our intermediated business in Australia to resolve the challenges we’ve seen with some of its portfolios, and to drive greater profitability.

Since then, its share price has levelled around $5.40 after August’s steep rise.

Only time will tell if IAG shares can regain pre-pandemic highs of around the $8 mark.

What if you had invested $1,000 into IAG shares 10 years ago?

If you had invested $1,000 in IAG shares in 2011, you would have bought them for around $3.02 apiece. The purchase would deliver approximately 331 shares without reinvesting the dividends.

Fast-forward to today, the IAG share price last closed at $5.42. This means that those 331 shares would be worth $1,794.02 (331 shares x $5.42).

When looking at percentage terms, this is a 79.4% increase or an average yearly return of 6.02%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has given back the exact same amount over the 10-year period (6.02%).

While it may appear that either investment would deliver the same returns, IAG has paid dividends to its shareholders.

Are IAG shares a buy?

A number of brokers have rated the company with comparable price points since the release of its full-year results on 11 August.

Citi raised its 12-month price target by 2.7% to $5.75 for IAG shares. Following suit, Morgans changed its rating, adding 5.2% to $5.65. And lastly, JPMorgan lifted its outlook by 5.9% to $5.35.

IAG presides a market capitalisation of roughly $13.3 billion, with more than 2.4 billion shares on its books.

The post If you invested $1,000 in IAG (ASX:IAG) shares a decade ago, here’s what it would be worth now appeared first on The Motley Fool Australia.

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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 owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Qantas Airways Ltd (ASX: QAN) share price is relatively flat since the beginning of 2021. The airline operator continues to battle COVID-19 which has severely affected its operations and the wider travel market.

At Tuesday’s market close, Qantas shares finished the day up 5.48% to $4.62.

What happened to Qantas shares last earnings season?

When Qantas reported its half-year scorecard for FY21, its shares tanked 6% within a matter of days. This was short-lived however, with the company’s share price rebounding to touch a 52-week high of $5.79 the following month.

Looking back at the results, Qantas delivered revenue of $2.33 billion, a mammoth 75% drop compared to the prior corresponding period. The stark fall came predominately from Victoria’s extended lockdown and nationwide border closures.

However, the company achieved underlying earnings, before, interest, tax, depreciation and amortisation (EBITDA) of $86 million. Management noted that this reflected the fundamental resilience of Qantas’ portfolio.

Nonetheless, the group posted an underlying loss before tax of $1.03 billion. This compares to a net profit before tax of $771 million in H1 FY20.

Qantas Group CEO Alan Joyce commented at the time:

These figures are stark but not surprising.

Despite the huge challenges, these results show the group’s underlying strength.

Our priorities remain the safety of everyone who travels with us, getting as many of our people back to work as possible and generating positive cash flow to repair our balance sheet.

Is the Qantas share price a buy?

A recent report released by Goldman Sachs slapped a buy rating on Qantas shares, indicating a 12-month price target of $6.38.

While this represents an upside of 38% based on the current Qantas share price, the broker noted some downside risks. They included rising competition, poor passenger volumes, higher fuel prices, loss of cost benefits, delayed border openings, and slower demand recovery.

Qantas has a market capitalisation of roughly $8.7 billion, with more than 1.8 billion shares on its registry.

The post The Qantas (ASX:QAN) share price fell 6% last time the company reported appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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There are a lot of growth shares for investors to choose from on the Australian share market.

To narrow things down, I have picked out three ASX growth shares that are highly rated. Here’s what you need to know about them:

Appen Ltd (ASX: APX)

The first ASX growth share to look at is Appen. Its vast team of crowd sourced experts prepare the data that goes into artificial intelligence (AI) and machine learning models. Appen does this for some of the biggest tech companies in the world such as Google and Facebook. And while demand has softened during the pandemic, it is expected to rebound once the crisis passes. Especially given how spending on AI is forecast to grow materially over the next decade.

The team at Citi remain positive on Appen. Even though they expect the company to fall short of expectations during the first half of FY 2021, they are holding firm with their buy rating and $18.80 price target.

ELMO Software Ltd (ASX: ELO)

Another ASX growth share to look at is ELMO. It is a HR and payroll platform provider that has been growing at a rapid rate over the last few years and even during the pandemic. Its popular software platform allows businesses to simplify and streamline a wide range of tasks. Demand has been strong, leading to strong recurring revenue growth. This was certainly the case in FY 2021, with its annualised recurring revenue (ARR) jumping 52.1% to $83.8 million. More strong growth is expected in FY 2022, with management providing ARR guidance of $105 million to $111 million

Earlier this month analysts at Morgan Stanley retained their overweight rating and $7.80 price target.

ResMed Inc. (ASX: RMD)

A final ASX growth share to look at is ResMed. It is a medical device company with a focus on the sleep treatment market. Thanks to its industry-leading products, wide distribution, and successful acquisitions, ResMed has been growing at a solid rate for over a decade. Pleasingly, this positive form looks set to continue over the long term. This is thanks to its significant market opportunity and the growing prevalence of sleep disorders.

Morgans is a big fan of ResMed. Earlier this month the broker put an add rating and $41.34 price target on its shares. It believes the company is well-placed to benefit from market share gains following a rival device recall.

The post 3 ASX growth shares that analysts love appeared first on The Motley Fool Australia.

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Motley Fool contributor 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 and has recommended Appen Ltd and Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia owns shares of and has recommended Appen Ltd and Elmo Software. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Redbubble Ltd (ASX: RBL) share price may be worth considering after the e-commerce company released its FY21 result.

That’s what the analysts at broker Morgans think anyway. Redbubble is back as a buy rated business with a price target of $4.83.

What was in Redbubble’s result?

Redbubble reported that it grew marketplace revenue by 58% to $553 million. Gross profit increased by 66% to $223 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 930% to $53 million. Net profit after tax (NPAT) was $31 million, up from a loss of $9 million.

The e-commerce business generated $55 million of operating cashflow, an increase from $47 million in FY20.  

Why might the Redbubble share price be a buy?

There are a few different factors to consider with Redbubble.

Scalable business model

Morgans says that it is a believer in Redbubble’s potential earnings and growth with its platform.

Redbubble operates an e-commerce model where artists are paid for their designs that are printed on various products like clothing, stationery, bags, phone cases and so on. Customers can buy products at Redbubble.com or TeePublic.com with these cool or interesting designs on them.

E-commerce business models can have a lot of operating leverage. Once the digital (and physical) infrastructure has been built, it can lead to rising margins as the business processes more volume and gets bigger.

This scalable model hasn’t helped things as Redbubble goes through a slowdown of demand. But if it grows revenue then Redbubble benefits. However, Morgans thinks it will be difficult for Redbubble to beat the prior corresponding months of sales in FY21 over the next few months. The broker thinks there could still be short-term potential weakness for the Redbubble share price.

Large addressable market

Redbubble believes that it’s uniquely positioned to be a significant winner in a market that’s worth around US$300 billion in core geographies. That’s expected to rise to $400 billion by 2024.

The ASX share points to several trends where it can benefit.

Structural shifts to e-commerce are expected to endure, according to the company.

There is increasing consumer demand for unique and meaningful products.

Redbubble also points to a growing creator economy which enables a scalable and dynamic source of unique designs.

The company believes it can reach marketplace revenue of $1.25 billion in the 2024 calendar year. That compares to $553 million of marketplace revenue in FY21.

Investing to capture the opportunity

Redbubble plans to invest in various parts of the business to try to capture more market share of that large opportunity.

It wants to invest in artist activation and engagement, meaning recruitment and account management. Redbubble also wants to improve the artist experience to optimise content.

Redbubble will also invest in user acquisition and transaction optimisation with improved digital experiences, marketing and geographic expansion.

Another target area will be customer understanding, loyalty and brand building.

Finally, Redbubble wants to invest in its product range and third party fulfilment network. This will help it realise fulfilment scale efficiencies.

Current Redbubble share price valuation

Redbubble shares may rise around 20% over the next 12 months, if Morgans is right.

Despite Redbubble’s expectation of heavy investing, the e-commerce business is predicted by the broker to generate $0.19 of earnings per share (EPS) in FY23. That translates to Redbubble shares currently being at 21x FY23’s estimated earnings.

The post 3 reasons why the Redbubble (ASX:RBL) share price could be a buy 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 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 Bruce Jackson.

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