Should you buy JB Hi-Fi Limited at this share price?

Credit: Peter Heath

With the share price of leading electronics retailer JB Hi-Fi Limited (ASX: JBH) gaining around 25% this calendar year to nearly $20, shareholders have enjoyed fantastic returns and significantly outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

While peer Dick Smith Holdings Ltd (ASX: DSH) has been experiencing significant negative investor sentiment which has led to a fall of around 70% in the company’s share price this year, JB Hi-Fi is operationally in a much stronger position and this means JB Hi-Fi is arguably better positioned to benefit from the all-important key Christmas trading season.

Here’s what we know so far…

  • In financial year 2015 JB Hi-Fi achieved record sales of $3.65 billion
  • JB Hi-Fi’s 187 stores have relatively high sales per square metre compared with peers and the stores are located in high foot traffic precincts
  • Over the course of FY 2016, management expects to open 7 to 8 new stores; convert 13 to 16 stores to the JB Hi-Fi Home format; and introduce small appliances to 22 existing stores
  • The first quarter trading showed 5.3% growth in total sales with comparable store sales up 3.7%. Guidance is for total sales of $3.85 billion with management noting that they “expect the market to remain competitive as retailers drive for market share in the lead up to Christmas.”

Based on analyst consensus data compiled by Thomson, JB Hi-Fi should earn 142 cents per share (cps) and pay dividends of around 94 cps in FY 2016. This implies a price-to-earnings multiple of 13.6 times and a fully franked dividend yield of 4.9% which looks compelling value and could attract investors to bid the share price higher.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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 Bruce Jackson.

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