Consumer and electronics business JB Hi-Fi Limited (ASX: JBH) has been an out of the market’s favour so far in 2014. While the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has risen 2.6%, the retailer’s shares have dropped 15.6%, although they remain nearly 18% higher over the last 12 months.
Here are three reasons why the fall in price could be an excellent opportunity for you to pick up a position in Australia’s favourite retailer…
1. On a P/E ratio basis, JB Hi-Fi looks cheaper than others in the sector. While it trades on a multiple of 14.5, other companies like Harvey Norman Holdings Limited (ASX: HVN) and David Jones Limited (ASX: DJS) are trading on multiples of 17.2 and 23.2 respectively.
2. Unlike plenty of other retailers, JB Hi-Fi has proven itself to be resilient through even the toughest of times. Its low-cost business model has helped its revenue increase annually over the last decade while its underlying profit only experienced a slight setback in 2012. Given the rapid rise of the online retail sector, JB Hi-Fi could well be your best bet for exposure to the retail industry (especially with consumer confidence picking up).
3. You can also expect strong growth from the retailer’s new Home format stores. While JB Hi-Fi expects to have opened 22 stores by the end of the fiscal year, that number could increase to as many as 75 by the end of 2016.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
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