Top line on song for further growth
Gear4music’s recent FY2019 profit warning prompted a stark share price reaction. However, there was no let-up in sales growth. As intended, Christmas market share improved at Gear4music and top-line expectations remain intact. Moreover, gross margins should end the year making progress on FY2018.There are good reasons to be positive, which now include valuation. Gear4music’s 4th January 2019 trading statement prompted a sharp negative share price reaction. The company revised FY2019 EBITDA guidance downwards to beneath last year’s level as gross margins were squeezed in the company’s fiscal third quarter. But there was no downward steer on sales growth, which arguably remains central to
the Gear4music investment case. Moreover, the company appears well on the way to addressing warehouse capacity constraints which were flagged in its latest statement.
Moreover, Gear4music’s product margins – a management priority - seem likely to trend higher in FY2019’s final couple of months. Gear4music is the UK’s market leader both online and overall for
musical instruments with a clear first mover advantage in web-based sales. International adds an extra fillip. Europe is poised to be the larger region by FY2020.
The post trading statement share price collapse in Gear4music implies a sizable EV/sales valuation de-rating. So far, estimates for sales have not been guided down. Furthermore, the outlook appears positive both near and longer term. As with other brisk sales growth online operators, EV/EBITDA and P/E ratios tend to be high by the standards of mainstream commercial companies. Gear4music was, and still is, no exception.
Valuation at 0.4x FY2019 EV/sales should not, in our view, preclude investors who believe in the arguably robust top line growth story from backing the company.
ASOS and its subsidiaries (together, the Group) is a global fashion retailer. The Group sells products across the world and has websites targeting the U.K., U.S., Australia, France, Germany, Spain, Italy and Russia. Co. creates and curates fashion, face + body products for every fashion-loving 20-something.
boohoo.com is a holding company. Co. is an online fashion group. Co.'s brands include BOOHOO, BOOHOOMAN, PRETTYLITTLETHING AND NASTY GAL. Co. designs, sources, markets and sells clothing, shoes, accessories and beauty products targeted at 16 to 30 year old consumers in the U.K. and internationally.
eve Sleep is an e-commerce company. Co. is focused on direct to consumer European sleep brand which designs and sells eve-branded mattresses and other sleep products. Co. has six products, including foam mattress, topper, pillow, sheets, protector and duvet. Co.'s foam mattress made are up of three layers: a base layer of high-density foam, which provides support and durability; a middle layer of open-celled foam, which encourages air flow; and a top layer of next-generation memory foam, which moulds around pressure points and then springs back once the pressure is released. Co.'s protector product is made of 100% cotton and a Neotherm membrane.
Gear4music (Holdings) is an e-commerce retailer of musical instruments and music equipment. The products are sourced from over 710 manufacturers, and range from kazoos to digital pianos, drum kits and guitars.
Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.