Why this stock is up 31% for the year

In the last 12 months, shares of Pacific Brands (ASX: PBG) have risen 31%, versus a 16% rise in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO). What’s behind this impressive outperformance?

Mr. Market front-running the turnaround

With the run-up in the stock in the past year, it seems Mr. Market has been front-running the company’s turnaround.

Pacific Brands is the company behind iconic Australian underwear brand Bonds as well as Berlei, which the company distributes through wholesale channels such as David Jones (ASX: DJS) and Myer (ASX: MYR). It also sells in its own retail and online stores.

But the last several years have seen Pacific Brands’ topline fall from $2.1 billion in 2008 to $1.3 billion in 2012, while net income fell from $117 million to a loss of about $450 million (the company wrote down $500 million worth of goodwill).

For the most recent half, sales fell 6.6% but net profits after tax increased 8.9% and earnings per share grew 10% (before significant items in the previous corresponding period) and the company raised its interim dividend by 25%.

Plans to return to growth

This morning, the company released a presentation detailing its plan to return to growth, including expanding its direct-to-consumer channels and a focus on international expansion. As the company points out, Pacific Brands has had a largely Australia-centric business, “with international markets largely untested.”

However, the company did not release guidance or a trading update, so it’s difficult to determine exactly what the full year results will hold.

Looking for a few more solid ideas? Two of Australia’s most promising small companies are still flying under the radar. Discover these two exciting ASX investments in our brand-new special FREE report, “2 Small Cap Superstars”. Click here now, it’s free!

More reading

Motley Fool contributor Catherine Baab-Muguira owns no shares in any company mentioned in this article.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!