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Lovisa Holdings Ltd reports profit of $13.5 milion – Could this share sparkle once more?

Photo: Lovisa Prospectus

Lovisa Holdings Ltd (ASX: LOV) is the listed company behind the popular jewellery chain Lovisa. Having listed via initial public offering in December 2014, the share price has since been on a wild ride.

After floating at an offer price of $2 a share, the stock raced higher and by July 2015 it reached a high of $3.79. The stock remained in the $3 to $3.50 range until January 27 when the group issued profit guidance which was well below market expectations. The share price subsequently plunged to a low of $1.96 and currently remains around the $2 level.

With the share price having rebased, the group’s financial results for the six months ending December 27 are worth a look by value hunting investors. Here are the key points from the interim report:

  • Revenue increased 13% to $82.6 million
  • Earnings before interest and tax (EBIT) grew 3% to $17.9 million
  • Net profit after tax expanded 8% to $13.5 million
  • The partially franked interim dividend remained flat at 6.67 cents per share
  • Lovisa achieved like-for-like store sales growth of 4.1% on a constant currency basis
  • Store numbers increased by 12 to 251 including 82 stores located outside of Australia. These overseas stores contributed 34% of revenue for the half

Sparkling opportunity?

One of the best times to buy a retailer with a proven business model is during the early stage of its store roll-out. Lovisa already has expansion footprints in New Zealand, Singapore, Malaysia, South Africa and the Arabian Gulf. The company also recently opened its first store in the UK with plans for a significant roll-out there.

Lovisa has provided guidance for full year EBIT of between $23.5 million and $25.5 million which suggests the stock is currently trading on an undemanding multiple of around 12 times. That’s attractive on a relative basis compared with other retail sector peers such as Pacific Brands Limited (ASX: PBG) on a multiple of around 17 times, Myer Holdings Ltd (ASX: MYR) on nearly 13 times and Premier Investments Limited (ASX: PMV) on 20 times. (Source: Thomson Consensus Estimates)

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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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