The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has soared during COVID-19. Since bottoming out at a 52-week low of $41.66 during the mid-March market crash, Domino’s shares have more than doubled to $84.64 at the time of writing.

But with a price-to-earnings (P/E) multiple of around 50, is the Domino’s share price overvalued?

How has Domino’s performed recently?

In the company’s FY20 annual report, Domino’s reported global sales of $3.27 billion, an increase of 12.8% over FY19. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a record $303 million, while net profit after tax grew by 3.3% year-on-year to $145.8 million.

The strong result was driven by impressive gains in the Japanese market. Domino’s Japan delivered 25.9% growth in sales year-on-year, with 75 new stores opening across the country in FY20. Sales growth was a more modest 5.1% in Europe and 4.1% in Australia and New Zealand, with both of those geographies reporting small declines in year-on-year EBITDA.

The broad drivers behind the result seem obvious. With many countries around the globe implementing some form of lockdown to halt the spread of COVID-19, restaurants have been closed and consumers have been spending more time at home. In these situations, demand for home-delivered meals has increased. With the notable exception of France and New Zealand, Domino’s outlets have remained open in some form or another in most jurisdictions throughout COVID-19.

A similar set of drivers have been behind the enormous share price gains made by meal-kit delivery service Marley Spoon AG (ASX: MMM). That company has also reported huge spikes in revenues throughout the pandemic, and recently upgraded its 2020 revenue guidance for year-on-year growth of between 80% and 100%.

However, the key question is whether this sort of growth can persist as more geographies emerge from lockdowns. Once people can resume eating out at restaurants again, what will it mean for the Domino’s share price?

For its part, Domino’s maintains a fairly bullish outlook. It forecasts same stores sale growth in the range of 3% to 6% over the next 3 to 5 years, and has its sights set on having a global network of 5,500 stores by 2033 (it currently has 2,680 stores).

About the Domino’s share price

Personally, I’m kicking myself for not buying Domino’s shares back in March at the height of the global coronavirus panic. In the intervening months, the company has adapted well to the ‘new normal’ of social restrictions and rolling lockdowns, boosting digital sales channels and embracing COVID-safe strategies such as zero contact delivery.

However, I do tend to think that Domino’s shares are overvalued at current prices. With a P/E multiple approaching 50, this makes its shares significantly more expensive than ASX competitor Collins Foods Limited (ASX: CKF), which currently trades at a multiple of a little under 40. Collins Foods operates KFC restaurants in Australia, Asia and parts of Europe, as well as the Australian Taco Bell network.

That being said, I also think that Domino’s is a much better and more mature business than Collins Foods, with better long-term growth prospects. It’s just that excitement around its short-term performance has overinflated its share price. My advice would be to keep the company on your radar – if there is a pullback in the Domino’s share price, it could still be well worth adding it to your portfolio.

More reading

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• 3 stellar ASX growth shares to buy right now
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• How to turn $20,000 into $350,000 in 10 years with ASX shares
• Marley Spoon share price on watch after upgrading revenue guidance

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Electro Optic Systems Hldg Ltd (ASX: EOS) share price has dropped 7% as trade opened this morning following the release of its half-year results.

After Friday’s market close, the Electro Optic share price finished the day at $6.20, a gain of 5.6%. It’s now trading at $5.75. No doubt it will be an interesting day for the defence contractor as investors digest the company’s results.

How did Electro Optic perform in FY 2020?

For the first half of the financial year ending 30 June, Electro Optics Systems achieved a weak result for its full-year earnings.

Here’s a snapshot of what the global defence contractor reported.

• Revenue of $75 million, up 31% on prior corresponding period, despite COVID-19 supply chain disruptions to customers.
• Statutory net loss after tax was down 291% to -$14.3 million as revenue and profit is deferred into H2 2020 and 2021.
• Earnings before interest and tax (EBIT) excluding foreign currency (FX) gains came in at loss of $18.2 million, a fall of 288% recorded in 1H19.
• Statutory net loss after tax was down 291% to -$14.3 million.
• Statutory diluted earnings per share also fell 253% to -12.42 cents.
• Operating cash flow dropped to -$62.6 million.

Electro Optics Systems continued to strengthen its balance sheet with cash on hand of $128.1 million and minimal debt obligations. The company anticipates strong cash flow from major contracts over the next 12 months, beginning Q4 2020.

The board has continued to not declare a dividend for shareholders, instead opting to use its capital to reinvest in the company’s growth plans.

What did management say?

CEO Dr Ben Greene said the major impact of COVID-19 on the company has been to delay revenue, profit and conversion of pipeline to backlog. He said: 

As this impact unwinds, EOS is expected to grow strongly in 2021 and beyond, with growth expectations even higher than expected 9 months ago due to strong business tailwinds not previously expected.

Outlook

Electro Optics Systems reaffirmed its prior guidance for the full-year of an EBIT between $20–$30 million, and an underlying EBIT margin of ~10%.

The $570 million backlog consisting largely of defence products awaits to be fulfilled, however Electro Optic advised the contracts remained committed from their retrospective buyers.

The company expects its communications backlog to grow strongly as its subsidiary, EM solutions sells to NATO allies in Europe and North America.

In addition, the $3.1 billion pipeline is expected to be drive top-line growth within the next 36 months. Four programs of upwards to >$1 billion with awards are due in 2021 and 2022, with a further 18 opportunities valued in excess of $200 million.

How has the Electro Optic share price performed in 2020?

Electro Optic shares have risen 210% since falling to a 52-week low of $2.95 in March. However, the Electro Optic share price is down almost 21% since the start of the calendar year and 57% from its all-time high achieved in February.

More reading

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• 3 ASX shares to buy and hold through COVID-19
• Here’s the best mid-cap growth share to buy on the ASX
• 4 ASX shares leading the way in drone technology

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The idea of buying dirt-cheap stocks may not appeal to some investors at the present time. The prospects for many companies are currently challenging in an uncertain economic world, which could lead to disappointing share price performances in the near term.

However, over the long run, their low prices could mean that they produce higher returns than more popular assets such as gold. As such, now could be the right time to purchase undervalued stocks, rather than seeking to profit from gold after its recent price rise.

Current price levels

Since nearly all investors would rather buy assets when they trade at low levels, buying dirt-cheap stocks could be a sound long-term strategy. It may enable investors to purchase high-quality businesses while they offer wide margins of safety. This could lead to impressive returns as the world economy recovers in the coming years, and the stock market gradually returns to previous highs.

By contrast, the recent rise in the gold price may mean that new investors are purchasing the precious metal at an unfavourable price level. It recently hit a record high, which suggests that investors have already factored in a period of low interest rates and economic uncertainty. While it could trade higher in the coming months if recent economic trends continue, its capacity to produce sustainably high returns in the long run seem to be somewhat limited.

Past trends

Of course, some dirt-cheap stocks could be priced at low levels for good reason. For example, they may have weak balance sheets or find it difficult to adapt their business models to a changing world economy. However, the past performance of the stock market suggests that it is very likely to recover. Therefore, buying a diverse range of companies now and holding them for the long run could lead to strong capital growth. After all, no recession or stock market downturn has ever lasted in perpetuity.

Equally, the past performance of the gold price shows that it also experiences peaks and troughs. For example, it took the precious metal nine years to return to its previous high from 2011 after falling out-of-favour with investors during the equity bull market of the past decade. Therefore, it is very unlikely to continually make new record highs as the outlook for the world economy improves, and investors become more comfortable in taking greater risks with their capital.

Buying dirt-cheap stocks

Clearly, it is imperative to buy a diverse range of dirt-cheap stocks. It is too soon to know which sectors and regions will return to strong growth following the coronavirus pandemic. By having exposure to a wide range of geographies and sectors, you are more likely to benefit from a stock market recovery. Over time, this can have a more positive impact on your financial position than buying gold while it trades close to a record high.

More reading

• Is the Domino’s share price too expensive?
• Electro Optic share price drops after half-year results
• Is the Mirvac share price the best real estate buy right now?
• NAB share price pushes higher on $1.44 billion MLC Wealth sales to IOOF
• Sealink share price jumps higher after delivering strong profit growth in FY 2020

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Mirvac Group (ASX: MGR) has been hit hard in 2020. Investors have sold out and pushed the Aussie real estate investment trust (REIT) share price 34.5% lower. But despite its struggles this year, I think there’s a lot to like about the Mirvac share price. Here’s why Mirvac could be a good pick if you’re after real estate exposure in 2020.

Why the Mirvac share price could be in the buy zone

Let’s start with the full-year result which was tough for investors to swallow.

Mirvac reported a 17% slump in revenue to $2,312 million and a 45% drop in net profit after tax. 

The Aussie REIT has four main business units across Office, Industrial, Retail and Residential. I think that diversification could be a good thing in 2020.

Office real estate is quite uncertain right now as the coronavirus pandemic forces a rethink of commuting arrangements. Aussie retailers are under pressure while residential and industrial markets are holding up for now.

That could make Mirvac a better buy than some concentrated REITs. For instance, Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX) are exclusively retail REITs.

That means Mirvac’s Industrial and Residential portfolios could outperform. There’s a strong pipeline in the residential business which could yield some strong results given the record low interest rate environment.

Occupancy rates in its Office and Retail portfolios were sitting at 98.3% with Residential operating earnings climbing 12% to $225 million. 

The Mirvac share price has been under pressure in 2020 but I think the various business levers could help stabilise earnings in FY21.

It’s far from a safe buy in my opinion but I think the strong yields on offer from the REIT could be worth it.

The Mirvac share price is currently yielding 4.35% per annum which is pretty handy in the current environment. 

What about other ASX REITs?

The Aussie retail REITs have been hit hard in 2020 with both Scentre and Vicinity slumping lower.

If today’s Mirvac share price isn’t in your buy zone, I think National Storage REIT (ASX: NSR) could be worth a look.

The National Storage share price is up 2.4% this year and could offer good diversification benefits.

National Storage generates strong earnings from its self-storage units which could benefit from strong housing activity. That means National Storage is worth keeping an eye on for strong yield and capital stability.

More reading

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In morning trade the National Australia Bank Ltd (ASX: NAB) share price is pushing higher after announcing a deal with IOOF Holdings Limited (ASX: IFL).

At the time of writing the NAB share price is up almost 1% to $18.06.

What did NAB announce?

This morning the banking giant announced that it has entered into a sale and purchase agreement to sell 100% of its MLC Wealth business to IOOF for a purchase price of $1,440 million.

The company advised that this agreement follows its strategic decision to pursue an exit of MLC. It is also in line with its strategy to simplify and focus on its core banking business, while creating a stronger future for MLC.

NAB’s CEO, Ross McEwan, explained: “We have a clear plan and we are getting on with it. The sale of MLC will enable NAB to prioritise investment and focus on executing our refreshed strategy of delivering simpler, more streamlined products and processes for our customers and colleagues.”

“NAB has taken a disciplined approach over the past two years to transform the business and prepare it for exit. Significant work has been done by MLC CEO Geoff Lloyd and his executive team to modernise and strengthen the MLC business and remediate customers,” he added.

The chief executive believes the sale of the business is the best outcome for shareholders and MLC stakeholders.

He added: “Consolidation has the potential to deliver significant benefits for clients and members, including scale and reducing costs, complexity and risks. The combined business is expected to be a highly competitive, advice-led retail wealth manager.”

What are the terms of the deal?

The purchase price of $1,440 million represents a multiple of 17.3x MLC’s cash earnings of approximately $83 million.

It comprises $1,240 million in cash proceeds from IOOF and $200 million in the form of a 5-year structured subordinated note in IOOF. The latter will provide NAB with the opportunity to participate in the potential value created through the combination of MLC and IOOF over the medium term.

In addition, NAB is expected to receive approximately $220 million of surplus cash from MLC in the form of a pre-completion dividend.

What impact will this have on NAB’s balance sheet?

On a pro forma 30 June 2020 basis, NAB core equity tier 1 (CET1) capital is expected to increase by approximately 30 basis points. This will result in a pro forma CET1 ratio of approximately 11.9%.

Management also expects the transaction to deliver a modest uplift to its return on equity.

Though, the transaction is estimated to result in a post-tax loss on sale of approximately $400 million. This includes post-tax separation and transaction costs for NAB of approximately $200 million.

Completion of the transaction is subject to certain conditions, including regulatory approvals from APRA and ACCC. Subject to the timing of these regulatory approvals, completion is expected to occur before the middle of calendar year 2021.

More reading

• ASX 200 Weekly Wrap: Earnings drag ASX back to reality
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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In morning trade the Sealink Travel Group Ltd (ASX: SLK) share price is storming higher following its full year results release.

At the time of writing the tourism and transport company’s shares are up 6% to $4.71.

How did SeaLink perform in FY 2020?

It certainly was an eventful year for SeaLink in FY 2020 as it battled the tough trading conditions caused by the pandemic and integrated its transformational $635 million acquisition of Transit Systems Group. The latter completed in mid-January, contributing approximately five and a half months of trading to this result.

For the 12 months ended 30 June 2020, SeaLink delivered a 152.8% increase in total revenue to $646.5 million. This comprises Australian Bus revenue of $277.1 million, International Bus revenue of $132.6 million, and Marine & Tourism revenue of $213.9 million.

On the bottom line, the company posted underlying net profit after tax and before amortisation of $37.2 million, up 47.2% on the prior year. Though, on a statutory basis, the company declared a loss after tax of $13.5 million. This was driven mostly by non-cash and one-off items. These include $12.4 million of COVID-19 related impacts.

Despite this, the company has declared a fully franked final dividend of 4.5 cents per share. This brings its full year dividend to 11 cents per share.

Outlook.

SeaLink’s CEO, Clint Feuerherdt, is positive on the company’s outlook.

He commented: “The successful acquisition and integration of the Transit System Group during the 2020 financial year has transformed SeaLink into an integrated, resilient, international multi-modal transport business.”

“Approximately 87% of SeaLink’s revenue is currently contracted to mostly large government clients and we are proud to have renewed and expanded many of these operating contracts, a testament to our focus on providing safe, efficient, convenient and sustainable travel,” he added.

The chief executive concluded: “The outlook for the Group continues to be positive. A strong pipeline of bus contracting opportunities is being pursued, our tourism assets are unique and attractive to domestic travellers and our balance sheet strength positions us to take advantage of opportunities that are coming to market.”

More reading

• Is the Domino’s share price too expensive?
• Electro Optic share price drops after half-year results
• Why I’d buy dirt-cheap stocks instead of taking advantage of the surging gold price
• Is the Mirvac share price the best real estate buy right now?
• NAB share price pushes higher on $1.44 billion MLC Wealth sales to IOOF

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Splitit Ltd (ASX: SPT) share price is on the move following the release of its half year results.

At the time of writing, the payments company’s shares are down 2% to $1.79.

How did Splitit perform in the first half?

As with almost all buy now later providers such as Afterpay Ltd (ASX: APT) and Zip Co Limited (ASX: Z1P), Splitit was a positive performer over the last six months.

For the half ending 30 June 2020, Splitit recorded a 133% jump in merchant sales volume (MSV) to US$89.1 million. This led to the company reporting a 244% increase in gross revenue to US$3.1 million for the six months.

Key drivers of its growth were increases in customer numbers and merchants. At the end of the half, the company had 149,000 active shoppers on its platform, up 28% on the prior corresponding period. Growing at a stronger rate, albeit from a very low base, were its active merchants. They are now 519, up 92% on the prior corresponding period. Since the end of the period, Splitit has signed up a further 116 new merchants.

Also improving was its repeat shoppers metric. Approximately 11.2% of shoppers that made a purchase in the first half have previously made a successful purchase. While this trails its peers materially, with an average order value of US$845, up 59% from US$531, these purchases are likely to be much less frequent than what Afterpay and co experience.

What else happened in the half?

During the half the company signed partnerships with Stripe, Visa, and Mastercard to accelerate innovation and merchant acceptance.

Management advised that these partnerships are progressing well.

In addition, Splitit integrated with B2B and B2C payment platform Blue Snap, and further enhanced its integration with open-source e-commerce platform, Magento.

Outlook.

Management advised that its growth is expected to continue in the second half and beyond.

It commented: “Splitit has a compelling consumer and merchant offering that is resonating strongly in the current environment. This has seen it deliver record MSV and Gross Revenue results, despite challenging global conditions.”

“This growth is expected to continue in H2 FY20 and beyond as its new partnerships with leading global organisations, Stripe, Visa and Mastercard, help to drive innovation in the buy now pay later space, improve the customer experience, and to accelerate the global acceptance of Splitit with new merchants. This growth will be supported by the Company’s enhanced leadership team and new brand identity,” it concluded.

More reading

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

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High paying ASX dividend shares can be difficult to find. However, if you look hard enough, there are some great deals on the ASX. The beauty of a dividend, once declared, is that it’s almost 100% certain to be paid. I believe all the companies discussed below represent solid investments and, furthermore, their dividend payments are higher than average.

It’s important to note when buying dividend shares that the purchase must be made prior to the ex-dividend date in order to qualify for the next payment. After this date, the buyer is not eligible to receive the next dividend. Also, bear in mind the practice of dividend harvesting. This is a tactic in which investors will buy shares to get the high yield payment, and then sell immediately as the share goes ex-dividend.

Nonetheless, I am confident these shares will continue to rise over the near term. So if you are willing to hold them for 3 – 6 months, you should also see a small level of share price growth.

One share to buy today for a 6.67% yield

Ashley Services Group Ltd (ASX: ASH) is a human resources consultancy offering training, recruitment and labour hire services. It has multiple brands operating in each vertical, and is also a registered training organisation (RTO). The company published its FY20 annual report on Friday, and correspondingly its share price jumped by 6.5%.

Over the past 5 days, the Ashley share price has risen by 10.9%. Nonetheless, the company is still selling at a price-to-earnings (P/E) ratio of 9.48. From its current report, and prior history, I believe this is a good small cap to own. It continues to increase sales and to build its footprint. In addition, the company has no borrowings and plenty of cash on hand. 

Based on Friday’s closing price, this ASX dividend share will yield 6.75%. However, it goes ex-dividend on 1 September, or tomorrow. So if you are going to get this dividend, there is little time to waste.

One ASX dividend yield of 12.5%

This ASX dividend share has only recently come onto my radar. Base Resources Limited (ASX: BSE) is a successful mineral sands company operating in Kenya and Madagascar. It has found an ore body that has a very low strip ratio, that is, a low waste-to-product ratio. Moreover, in the past month, the Base Resources share price has risen by 29.1%. 

The company’s net profit after taxes (NPAT) for FY20 was $39.6 million. This was a slight reduction on 2019 due to reducing ore grades where it is producing. Nevertheless, the company intends to produce 700 kilo tonnes in FY21, an increase of 50.2%. 

This year will be the company’s maiden dividend payment. Based on Friday’s closing price, this dividend will yield 12.5%, which is a large payment by any standards. From my investigations, Base Resources appears to be a company that delivers on its promises. As such, I think it’s a good investment regardless of the payment. 

The share goes ex-dividend on 18 September. 

A beautiful company to buy before Wednesday!

One look into the financials, website or buildings of Sunland Group Limited (ASX: SDG) and you will see a company obsessed with beauty. The entire company and its products reflect minimalism, with sleek lines, soft angles and the reinforcement of architecture as art. This small cap is valued at $194 million and is a residential property developer with a difference. I have to admit, I find the company’s aesthetics highly appealing.

However, Sunland has not had a great year due to coronavirus. It has seen statutory net profits after tax reduce to $2.4 million due to one-off write downs. Nevertheless, gearing is still low at 33%, and the company is set to see a great improvement in FY21. At present, it has a net tangible asset value of $2.56 per share, yet is selling at $1.42. 

If you purchase this ASX dividend share before Wednesday 2 September, then based on Friday’s closing price, it will pay a yield of 7.04%. Aside from its dividend, I also believe Sunland Group will be a good company to own over the medium term in general. 

More reading

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Cooper Energy Ltd. (ASX: COE) share price is one to watch after the oil and gas producer reported a 150% slump in underlying net profit after tax (NPAT) this morning.

Why is the Cooper Energy share price on watch?

Cooper Energy reported a full-year underlying net loss after tax of $6.6 million for the year ended 30 June 2020 (FY20).

That’s despite production levels climbing 19% higher to 1.56 million barrels of oil equivalent (MMboe) with sales revenue edging 3% higher to $78.1 million.

Underlying earnings before interest, tax, depreciation, amortisation and exploration expense (EBITDAX) fell 14% to $29.6 million. Cooper Energy reported a 611% drop in statutory NPAT, resulting in an $86.0 million loss.

That included a $107.5 million impairment charge announced on 25 August as part of $79.4 million in net significant items after tax.

The Cooper Energy share price is one to watch in early trade following the results announcement. Despite soft earnings, the oil and gas producer reported a 134% surge in cash flow from operations to $48.1 million.

Net debt also increased by 81% to $97.8 million with cash holdings down 20% to $131.6 million.

The coronavirus pandemic sparked an oil price war in March which has put operating margins under pressure. However, Cooper Energy’s gas strong gas revenue helped to offset the $8.7 million decrease in oil revenue for the year.

Prior to this morning’s open, the Cooper Energy share price was down 45.1% for the year. Shares in the oil and gas company closed at $0.34 per share on Friday, having set a new 52-week low of $0.33 in Thursday’s trade.

Outlook

Management is forecasting excess supply in the liquid natural gas (LNG) market for 2020-2021 which will put downward pressure on prices.

However, in the medium term (2022-2023), Cooper Energy sees supply tightening as output declines.

The Cooper Energy share price will be one to watch this morning after also providing guidance for FY21.

The Aussie energy group is forecasting significant exploration and development cuts across its portfolio. Otway capital expenditure is expected to fall from $44.3 million in FY20 to 33-38 million this financial year.

Overall capital expenditure is expected to fall from $76.7 million to $50-58 million in FY21.

More reading

• Last week’s worst performing ASX shares
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Temple & Webster Group Ltd (ASX: TPW) share price is on watch today after the online retailer delivered record full year results. Consumers spending more time at home have increased spending on homewares while the coronavirus pandemic has prompted a shift to online shopping. These twin trends have benefitted Temple & Webster, driving sales to record levels.  

What does Temple & Webster do?

Temple & Webster is an online-only furniture and homewares retailer. Australia’s largest e-commerce company in the furniture and homewares space, Temple & Webster sells more than 180,000 products from hundreds of suppliers. The company operates a drop-shipping model where products are sent directly to customers by suppliers. This reduces the need to hold inventory and complements a private label range sourced directly by Temple & Webster. 

How did Temple & Webster perform in FY20? 

Temple & Webster saw sales and revenue accelerate over the course of FY20. Full year revenue was $176.3 million, up 74% year on year. Second half revenue was up 96% on the prior corresponding period while Q4 revenue was up 130%. Active customers grew 77% year on year to reach 480,000 and the company had its first $2 million day in June. Full year EBITDA was $8.5 million, up from $1.5 million in FY19. This gave net profit after tax of $13.9 million, which included an income tax benefit of $5.9 million. 

CEO Mark Coulter said:

Our strategy of being a category specialist, with a clear customer offering built around the biggest and best range of furniture and homewares in the country, combined with the most inspirational content and services and a great delivery experience and customer service, is working. The advantages of being the online market leader are apparent as we continue to grow our market share. 

What is the outlook for Temple & Webster? 

FY21 has started strongly for Temple & Webster, which reached the 500,000 customer milestone in July. Revenue grew 161% year on year to 27 August, with trade ~160% up in both July and August. EBITDA for July and August is estimated to be ~$6 million. The mobile app has been launched in the app store and the company’s second national television campaign will start at the end of Q1. The company had cash of $81 million and no debt as at 27 August, thanks to a recent $40 million placement. This leaves it well funded to pursue its growth objectives. 

The Temple & Webster share price was at $8.21 in close of trade on Friday.

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

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