The Whitehaven Coal Ltd (ASX: WHC) share price is on the move on Thursday following the release of its quarterly update.

At the time of writing, the coal miner’s shares are up 5% to $1.84.

How did Whitehaven Coal perform?

For the three months ended 31 December, Whitehaven Coal achieved managed run-of-mine (ROM) production of 5.1Mt. This was up an impressive 64% on the prior corresponding period.

From this, total quarterly managed coal sales came in at 4.5Mt, which was in line with the same period last year. Management noted that the outage of one of Newcastle Coal Infrastructure Group’s (NCIG) two ship loaders has resulted in 550kt of equity sales slipping from December 2020 into January 2021.

Whitehaven realised an average price of US$62 per tonne for its thermal coal in the quarter. While this was 8% lower than the quarterly globalCoal Newcastle Index average, the company notes that its prices lag the average when rapid changes occur.

Pleasingly, the globalCoal Newcastle Index coal price averaged US$67 per tonne for the quarter before finishing it above US$80 per tonne. The improved pricing environment reflects increased seaborne thermal coal demand, which is being driven largely by an Asian economic recovery accelerating post the initial impact of COVID-19.

The company’s CEO, Paul Flynn, commented: “During the latter part of the December quarter there was a strong rebound in pricing and we are increasingly optimistic that underlying market dynamics are supportive of continued improvement in this area.”

Looking ahead, management has tightened its guidance range for FY 2021. Whitehaven now expects FY 2021 managed coal sales (excluding purchased coal) to be 19Mt to 20Mt, up from 18.5Mt to 20Mt.

It made the move after “seeing much more consistent and better performance across production and overburden management.”

More reading

• ASX 200 rises 0.1%
• Here’s how ASX 200 energy shares have performed in 2020 so far
• Why ASX energy shares in this beaten down sector could rally in 2021
• Why the Whitehaven Coal (ASX:WHC) share price is surging 5% this morning

Motley Fool contributor James Mickleboro 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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ASX energy shares have been under a lot of pressure in recent months. The AGL Energy Limited (ASX: AGL) share price slumped to a new 52-week low on Wednesday morning and remains down 41.1% in the last 12 months.

And AGL is far from alone. Origin Energy Ltd (ASX: ORG) shares have slumped 40.2% lower in the past year. So, what’s putting ASX energy shares under pressure and what’s ahead for 2021?

Why ASX energy shares are slumping lower

The coronavirus pandemic hit energy producers hard in 2020. Key industries like manufacturing effectively shut down which caused demand for energy to plummet.

Other key industries such as office real estate also had reduced energy needs in 2020.

A reliance on coal-fired power stations, which are struggling to turn a profit at current electricity prices, is also impacting on profits.

The flow on effects have been felt by shareholders with ASX energy shares falling lower in the past year.

While AGL shares hit a 52-week low in yesterday’s trade, both AGL and Origin ended the day in the black.

That’s despite an article in the Australian Financial Review (AFR) discussing potential overinvestment in Aussie energy.

Snowy Hydro is pushing ahead with a 750 megawatt (MW) gas power plant despite a number of large-scale projects on the horizon. 

Origin has also confirmed a 4-hour 700 MW battery at its Eraring power station on the NSW Central Coast.

The Federal Government is hoping further NSW dispatchable capacity will support any private sector shortfall.

But the Grattan Institute is suggesting that the case for further investment may not stack up. Grattan Institute energy program director Tony Wood said the case for building 1000MW of capacity has “never been substantiated”.

Foolish takeaway

All of this sets up an interesting period for ASX energy shares to start the year with a race to increase energy generation and storage capacity.

More reading

• Which ASX 200 shares have been slapped with price downgrades this week?
• The AGL (ASX:AGL) share price just hit a 12-year low
• Leading brokers name 3 ASX shares to sell today
• 3 highest yielding ASX dividend shares
• Here are 3 ASX shares trading near their 52-week lows

Motley Fool contributor Ken Hall 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 Altium Limited (ASX: ALU) share price has been out of form this week due to the release of a disappointing trading update.

Week to date, the electronic design software company’s shares have fallen over 9%.

What was Altium’s update?

On Tuesday, Altium revealed that it expects to report a 3% decline in first half revenue to US$89.6 million. This soft half was driven by extreme COVID conditions in the US and Europe and challenging conditions in China for licence compliance activities.

One positive, though, is that an improvement in trading conditions in the second quarter has led to the company retaining its FY 2021 guidance.

This is for revenue of US$200 million to US$212 million (6% to 12% growth) and EBITDA of US$76 million to US$89 million (38% to 42% growth), less the contribution from its TASKING business which is being sold.

Though, judging by the performance of the Altium share price since the update, it doesn’t appear as though the market is overly convinced it will achieve this guidance.

Will Altium achieve its guidance?

Goldman Sachs has been looking closely at Altium and has given its verdict on its FY 2021 prospects.

Goldman commented: “To achieve the bottom end of FY21 guidance ALU would require revenue growth of +15% in 2H21E (on 2H20). While we anticipate the macro environment for ALU will improve through 2021 based on well above consensus GS macro forecasts, there remain risks to the achievement of this.”

However, it believes weakness in China could be a stumbling block in the company achieving this guidance.

“Given our global forecasts for a strong macro recovery through 2021, it is possible that ALU’s recent downgrade cycle may be nearing an end. However, the 1H21 decline of 15% yoy in revenues from China is a concern as it is not clear if this is a temporary issue or indicative of emerging headwinds in this geography noting it contributed 30% of Altium Designer perpetual licence sales volumes and 11% of its subscription licence sales volumes in FY20.”

In light of this, and even though its price target of $34.30 implies a potential return of 21%, the broker has decided to retain its neutral rating.

Goldman plans to sit tight until a more detailed disclosure is available at its half year results in February.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises 0.1%
• Top brokers name 3 ASX shares to buy today
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise
• Why Afterpay, Altium, Mesoblast, & PolyNovo shares are dropping lower

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The Pilbara Minerals Ltd (ASX: PLS) share price will be on watch today following an update on the company’s retail entitlement offer.

After hitting a multi-year high yesterday, it will be interesting to see if the Pilbara share price can top that performance today following the latest announcement.

After yesterday’s closing bell, the Pilbara share price finished the day off at $1.15.

Completion of retail entitlement offer

According to this morning’s release, Pilbara advised that it has successfully completed its retail entitlement offer.

Underwritten for a 1-for-7.6 pro-rata basis, roughly 125 million new shares were issued to participating retail shareholders. Offered at 36 cents per share, the rights issue raised $60.6 million for the company.

Pilbara said that the remaining 43.2 million shares that were not taken up in the offer were allocated to sub-underwriters, AustralianSuper and RCF VII.

In total, 168.2 million new shares will be issued and rank equally among ordinary full-paid Pilbara shares. The new lot is expected to be allocated to participating shareholders’ portfolios next Monday and will be available to trade.

The retail entitlement offer follows the company’s institutional placement efforts to support its acquisition in Altura Lithium Operations Pty Ltd. Both proceeds raised $240.2 million to fund the takeover. Pilbara stated that it is on schedule to purchase all shares in Altura Lithium Operations and its Altura Project.

What did management say?

Pilbara managing director and CEO Mr Ken Brinsden welcomed the result, saying:

We are delighted with the level of support we have received from retail shareholders and are pleased to now confirm the successful completion of the Entitlement Offer.

… Together with the cornerstone placement announced on Monday, 14 December 2020, provides Pilbara Minerals with the funding necessary to complete the acquisition of the neighbouring Altura Project on an unencumbered basis, thereby realising the full value of synergies and benefits for Pilbara Minerals’ shareholders that arise from this unique opportunity.

About the Pilbara share price

The Pilbara share price has been storming higher over the past 12 months, reaching a multi-year high of $1.15 yesterday.

Falling to as low as 13.5 cents in March when COVID-19 hit the world economy, Pilbara shares have been on a tear ever since. For those lucky investors who were brave enough to pick up some shares, you would be sitting on a gain of 751%.

More reading

• Fundies reveal 3 top ASX shares to buy for 2021
• The Pilbara Minerals (ASX:PLS) share price is already up 25% in 2021
• Are ASX lithium shares staging a comeback in 2021?
• 3 ASX mining shares hitting 52-week highs today
• Here’s why the Orocobre (ASX:ORE) share price is on the move today

Motley Fool contributor Aaron Teboneras 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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Some of the country’s top fund managers have revealed some great ASX share picks for 2021.

There was a huge amount of disruption in 2020 due to the COVID-19 pandemic.

These businesses have been identified by fundies as among the best opportunities for 2021:

Downer EDI Limited (ASX: DOW)

Downer is the choice of fund manager Matthew Kidman from Centennial Asset Management.

The ASX share boasts that it has a history dating back over 150 years. It designs, builds and sustains assets, infrastructure and facilities and it’s the leading provider of integrated services in Australia and New Zealand.

Downer is currently in the process of restructuring its business and it’s selling assets. A recent sale was a mining business. Mr Kidman said that it’s selling its lumpy, heavy capital intensive components, and going into a much more capital-light service-based business with a lot of long-term government contracts.

The fund manager said that Downer is really unloved by the market but it’s making progress in fixing the business with a good balance sheet and its business divisions.

Mr Kidman believes the company will get a re-rate by the market after it divests some of the lower-returning businesses and focuses on better-returning businesses. He thinks it can trade on a higher earnings multiple and the business can also increase its earnings. The fundie believes the share price could reach at least $7 in 2021 as the story unfolds.

Mortgage Choice Limited (ASX: MOC)

Mortgage Choice is the ASX share pick for 2021 of Matthew Booker, from Spheria Asset Management. Spheria is actually the largest shareholder of Mortgage Choice at the moment.

Spheria believes the outlook for the mortgage broking industry looks “fantastic” for the next five or ten years. He said that the financial services royal commission was hell and at one point it looked like the industry may get shut down. But now, Mr Booker believes, the mortgage broker industry is actually going to proliferate.

The fundie believes that mortgage brokers will gain increasing market share of the mortgages market, and he thinks that Mortgage Choice can achieve a rising market share of the broker industry.

Tyro Payments Ltd (ASX: TYR)

The ASX share choice of Ben Clark from TMS Capital is Tyro Payments. Mr Clark thinks that the business has got a really good long-term structural growth story.

The fundie thinks Tyro is a recovery play because as the economy reopens and relaxation starts to come back in, Tyro could benefit from the amount of hospitality merchants it services and there could be “some pretty strong growth.”

There are four catalysts that TMS Capital sees for the ASX share. First, the fund manager sees the volume of transactions accelerating through the network. Between 1 December and 11 December, Tyro saw 29% growth compared to the prior corresponding period.

Second, Mr Clark thinks the ASX share will gain more of the market share and potentially enter into new verticals.

Third, he’s excited by the launch of TyroConnect. This is the integration hub that Tyro has build around it point of sale (POS) system, which TMS thinks will create more customer loyalty.

The final point was that the lending part of the business, which froze during the COVID-19 period, will rise again. It could turn into a good profit centre.

However, Tyro recently announced that it has experienced terminal connectivity issues for some of its EFTPOS terminals. An issue caused some terminals to lose connectivity, so they couldn’t transact or be updated remotely.

To fix this, Tyro has been collecting, repairing and returning impacted terminals to merchants as quickly as possible.

On 13 January 2021, about 70% of merchants were unaffected, a further 11% of Tyro’s merchants have multiple terminals with at least one functioning unit allowing them to continue to process payments. It’s the remaining 29% that are fully impacted and are the focus of the recovery effort. Approximately 2,000 terminals a day are now being collected. Tyro expects the majority of impacted merchants to be back to normal operations by the end of the week, with the rest sorted in the following week.

More reading

• Tyro (ASX:TYR) could face legal action for catastrophic outage
• Why this fund manager tips Downer EDI (ASX:DOW) as the share to own in 2021
• Why Altium, Clover, PolyNovo, & Tyro shares are dropping lower
• Angry Tyro (ASX:TYR) customers jump ship
• 7 ASX shares to buy for 2021

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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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Many ASX building material stocks have been outperforming but one laggard has several opportunities to play catch up in 2021.

The stock in question in the Boral Limited (ASX: BLD) share price, which is barely sitting on a 1% gain over the past year.

In contrast, the James Hardie Industries plc (ASX: JHX) share price surged 26%, BlueScope Steel Limited (ASX: BSL) share price added 17% and CSR Limited (ASX: CSR) share price gained 8%.

2021 outlook for ASX building material stocks

Sentiment towards these stocks have been bolstered by stronger than expected housing construction approvals and starts in the US and Australia.

The sector is likely to remain well supported despite fears that tailwinds will start to wane.

“Looking into 2021, investors are asking when does the sector peak? November AUS detached housing approvals of ~138k are 2 standard deviations away from the long term average of 107k, which suggests we are near the peak,” said UBS.

“However, prior peaks were defined by rate hikes. Unless we see a rate hike or credit lending restrictions tighten, housing likely has more upside this year.”

Boral share price in the spotlight

While this is good news for ASX building materials shares, it’s the Boral share price that investors will want to watch. UBS believes 2021 could be Boral’s year as it has multiple chances to play catch-up.

In the first instance, Boral could be cum-consensus upgrade. The market is expecting Boral to post a FY21 earnings before interest and tax of $412 million. UBS reckons that’s too low and is forecasting EBIT of $460 million instead.

Greater clarity on valuation

Management could also quantify a cost-out target. This could spur excitement in the stock as many have been left guessing what the savings will be. UBS believes the number if $75 million.

Thirdly, if rival Knauf sells its plasterboard assets, like UBS expects, investors will be able to value the USG Boral joint venture divesture more confidently.

“We expect more US BMAT [building materials] sales, the late 2020 sale of Midland Bricks for A$250m or 8x EV/EBITDA (2021 UBSe) signalled the start of the US BMAT exit,” said UBS.

“We think the market is not pricing in any of these four events.”

ASX stocks to buy for 2021

The broker is recommending the Boral share price as a “buy” with a 12-month price target of $5.60 a share.

But Boral isn’t the only ASX stock in the sector that UBS likes. It’s also recommending investors buy the James Hardie share price, CSR share price and Brickworks Limited (ASX: BKW) share price.

More reading

• 3 ASX dividend shares with yields above 4%
• The ASX 200 stock facing a day of reckoning at the February reporting season
• Is the “Blue Wave” of US Democrats good or bad for ASX investors?
• Got money to invest for income? Here are 3 ASX dividend shares
• 2 ASX dividend shares to buy for 2021

Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited and James Hardie Industries plc. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Brickworks. 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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If you’re a growth investor, then you’re in luck. This is because there are a number of companies on the Australian share market that have been growing at a strong rate in recent years.

Two that have been tipped to continue this positive form over the long term are listed below. Here’s what you need to know about them:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX growth share to look at is Domino’s. This pizza chain operator has been a positive performer over the last 12 months and delivered strong growth during the pandemic.

But management is resting on its laurels and has bold long term growth plans. Domino’s had a network of 2,668 stores across Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark at the end of FY 2020. It is now aiming to more than double this network to 5,500 stores by 2033.

And that’s just from the markets that it operates in at present. There is speculation Domino’s could expand into new areas over the next decade to boost its growth inorganically.  

Goldman Sachs is positive on Domino’s and its growth prospects. Its analysts have put a conviction buy rating and $88.00 price target on its shares. The broker believes the company has the potential to maintain a double digit operating earnings compound annual growth rate (CAGR) over the medium term.

Xero Limited (ASX: XRO)

Another growth share to look at is Xero. It is a leading cloud-based business and accounting software provider that has evolved into a full service small business solution over the last few years.

This has led to the company recording exceptionally strong customer and revenue growth over. Pleasingly, this has continued in FY 2021. During the first half, Xero recorded a 21% increase in operating revenue to NZ$409.8 million. This was underpinned by a 19% lift in subscriber numbers to 2.45 million thanks to growth across all markets.

Goldman Sachs is also a fan of Xero. It recently initiated coverage on the company with a buy rating and $157.00 price target on its shares. The broker believes Xero can grow its subscribers to 7.4 million by 2030 and generate NZ$3.4 billion in annual revenue from them.

More reading

• Fund managers are buying Domino’s (ASX:DMP) and this ASX share
• Can the Domino’s Pizza (ASX:DMP) share price go even higher?
• The Xero (ASX:XRO) share price is down 10% in 2021: Is this a buying opportunity?
• ASX 200 down 0.4%: Afterpay tumbles, bank shares lower, gold miners crash
• Why Costa, Monash IVF, Newcrest, & Xero shares are dropping lower

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 Xero. The Motley Fool Australia has recommended Dominos Pizza Enterprises 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 Rhythm Biosciences Ltd (ASX: RHY) share price roared over 12% higher yesterday to close at $1.18. Over the past six-month period, the Rhythm Biosciences share price has thundered over a staggering 1,300%.

Rhythm Biosciences share price hits record high

Just over a week ago, the Rhythm Biosciences share price hit a record high. This gain was following two positive December announcements. The first announcement related to the company appointing a manufacturer for its ColoSTAT product. 

ColoSTAT is a minimally invasive blood test that supports the early detection of bowel cancer. Colorectal cancer is presently the second biggest cause of cancer death in the world and continues to grow.

The second announcement also pertained to ColoSTAT, this time in the shape of a US patent grant. Expansion into the US market resulted in the Rhythm Biosciences technology being accessible to nearly 800 million people worldwide.

During 2020, the Rhythm Biosciences share price rocketed over 640%. The company’s current market cap is $210.6 million.

The ColoSTAT technology

The Rhythm Biosciences ColoSTAT technology is being developed as an alternative screening option for people who do not elect to participate in presently available screening options for personal, cultural, or clinical reasons.

According to Rhythm Biosciences, the technology behind this new blood test is designed to be cost effective, minimally invasive, easily run by laboratories and comparable, if not better, than current tests that are purposed to detect early stage colorectal cancer. 

Rhythm Biosciences believes that its technology has the potential to save both lives as well as public health costs. 

A global market focus 

In response to the December approval of the US patent grant for ColoSTAT, Rhythm Biosciences had the following to say about the opportunity presented:

The US represents one of the largest diagnostic markets in the world. The addition of a US patent sees Rhythm expand its global footprint and ultimately, access to a global addressable screening market of close to 800 million people.

In the US, the current 50-74-year-old screening eligible population is approximately 94 million people. This market could grow in the short term by a further 21%, following the US Preventative Services Task Force recommendation that the colorectal cancer screening age be reduced, beginning at 45 years. As a result, where the expansion in the screening age group occurs in other markets, it is expected that the current global addressable market will also increase considerably.

More reading

• Here’s why the Rhythm Bioscience (ASX:RHY) share price is up 15% to a record high
• Here are 3 ASX small cap shares with exciting product launches in 2021
• Why the Rhythm Biosciences (ASX:RHY) share price jumped over 600% this year
• The Rhythm (ASX:RHY) share price is surging 5% higher today. Here’s why.

Motley Fool contributor Gretchen Kennedy 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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Here at The Motley Fool we believe shares are a smart way to build wealth for the future.

Many Australians have agreed with this sentiment in the past year, and have joined the market for the first time in droves.

It’s excellent that they have dipped their toes into what can be a daunting experience. Getting started is the hard bit.

But once they’re in the market, novice investors need to be aware of deep-seated psychological biases that could wreck their decision-making. These are human urges that not even professionals can sometimes resist.

Falling prey to these unconscious habits could see you make big losses when buying and selling shares.

Here are 4 of the most common ones that shareholders fall victim to:

Dunning-Kruger effect

The Dunning-Kruger effect describes the way humans overestimate their own abilities.

A classic example is how most people think they are a good driver — even though by definition not everyone can be “good”.

In the share market, this is often seen in the hubris of “I can beat the market”.

The reality is that even professional fund managers find it difficult to constantly outperform indices. So how would a beginner or an amateur do better (without fluking it)?

“They try to make a lot of money quickly – that’s how movies like Wall Street make investing seem,” Stockspot founder Chris Brycki told Yahoo last year.

“But truthfully, it’s very difficult to beat the market and consistently be a winner overall.”

Escalation of commitment

This is classic behaviour from many novice investors. 

A stock you own has plunged in value. Then you buy even more shares — not because you think the company has a great future, but because you want to recover your losses.

If you had x dollars to invest, why would you deliberately put it into a company that’s in trouble? Wouldn’t it be better to invest it in something else that you have more faith in?

There is nothing wrong with buying low, but it has to be for the right reasons.

Anchoring

Anchoring is a psychological phenomenon seen in every person on a daily basis — not just in the investing world.

It describes the way humans use the first-known data as a yardstick to compare everything else that comes after it.

A perfect example is in shopping. If you first see a particular television on sale for $2,000, then seeing it sell for $1,500 at another store will seem like a fantastic deal.

But the $2,000 anchor is a random valuation, unrelated to the worth of the actual product.

A third shop may be selling at $1,200, which is the true value of the television. But a buyer that fell victim to anchoring would have already snapped it up for $1,500.

In the share market, setting arbitrary selling or buying points is a way of setting anchor.

An Afterpay Ltd (ASX: APT) shareholder who sold for $20 last year after seeing it sink to $8 in March is an example of this. (It’s now more than $110)

Stock investors must always tell themselves to ignore earlier numbers and judge each selling and buying opportunity purely on merit.

Illusion of control

Our The Motley Fool colleagues in the US describe this best:

If you’ve ever made money day trading and patted yourself on the back for a job well done, you’re probably a victim of the illusion of control.

Related to the Dunning-Kruger effect, this is when an investor thinks their own skill led to a favourable outcome — even though it was mostly luck.

This psychological bias is often seen in punters who indulge in short-term trading.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 2 exciting ASX tech shares to buy today
• Will the ASX see a share market bubble in 2021?
• Big brokers still love the Afterpay (ASX:APT) share price
• Why Afterpay, Altium, Mesoblast, & PolyNovo shares are dropping lower

Motley Fool contributor Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of 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 Premier Investments Limited (ASX: PMV) share price was on fire on Wednesday following the release of a trading update.

The retail conglomerate’s shares ended the day 13% higher at $25.35.

At one stage, the Premier Investments share price was up almost 19% to a record high of $26.70.

How is Premier Investments performing?

Premier Investments’ update revealed that its Retail business has been performing exceptionally well during the first half of FY 2021.

As a result, the company is expecting this side of the business to deliver earnings before interest and tax (EBIT) of $221 million to $233 million for the 27 weeks ending 30 January.

This will be up between 75% and 85% on the EBIT of $126.1 million it achieved during the 26 weeks ended 25 January 2020.

Management advised that this has been driven by strong like for like sales, a significant lift in higher margin online sales, and cost savings largely from rental reductions.

Is it too late invest?

One broker that believes it is too late to invest is Goldman Sachs.

According to a note out of the broker this morning, its analysts have retained their sell rating but lifted their price target slightly to $20.80. This price target implies potential downside of 18% from yesterday’s close price.

The broker doesn’t appear to believe that this strong form will last beyond FY 2021 and is forecasting a decline in earnings in FY 2022.

The broker is forecasting earnings per share of $1.40 in FY 2021 but then just $1.03 in FY 2022 and $1.09 in FY 2023. In light of this, it feels its shares are expensive compared to peers.

Goldman explained: “While the higher margin online sales is likely to be an ongoing structural benefit for PMV, the unique conditions driving the strong sales environment are, in our view, going to be difficult to sustain beyond FY21 as will be the reductions to operating costs. We estimate that GM expansion, operating leverage and the cost mitigating factors have all been material to this profit outcome.”

“PMV looks reasonably priced on FY21E P/E of 18x compared to its 5-year average of 19.9x. However, on a sustainable profit basis, PMV continues to screen expensive vs. its peers, currently trading at 24.7x on a reported P/E basis and 22.1x when adjusted for the market value of its ownership of Breville Group (BRG: ASX) and Myer (MYR: ASX),” it concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises 0.1%
• The Accent Group (ASX:AX1) share price just got hit by a broker downgrade
• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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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