Is JB Hi-Fi Limited a buy?

JB Hi-Fi Limited (ASX: JBH) recently re-affirmed FY14 net profit guidance of $126-129 million. This is a strong result considering the recent spate of downgrades by Australian retailers following the May Federal Budget. However, the company’s sales did slow in the second half of FY14, up only 3%, compared to previous guidance of between 5-9%. So what does the future hold for JB Hi-Fi?

I expect the share price of JB Hi-Fi will perform well over the next two years as a result of the following:

1) Retail spending should improve in the first half of FY15 as consumers gain more confidence as negative sentiment from the Budget becomes a distant memory.

2) The company plans to open another 30 stores in the medium term across Australia and New Zealand, providing further sales growth.

3) JB Home is set to grow earnings at a solid rate. The Australian home appliance industry is a $4.5 billion industry. JB Hi-Fi currently holds less than 1% of this market and it therefore represents a large growth opportunity. One analyst has predicted that the company may be able to obtain a 9% share of the home appliance market by 2020, given the company’s history, this appears very achievable.

4) A lower Australian dollar will reduce overseas and online competition. While predicting exchange rates is always difficult, many economists believe the Australian dollar is overvalued.

JB Hi-Fi looks good, but this stock looks even better.

Record profits and a fast growing, fully franked dividend...

This little known ASX company has already delivered eight consecutive years of profit and dividend growth... but with even more growth ahead, the shares are still a firm "BUY" today! Discover The Motley Fool's #1 dividend pick in our newly updated report. Simply click here for your FREE copy right now.?

Motley Fool contributor Bradley Murphy does not own shares in any company mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.