Why the JB Hi-Fi Limited share price is near an all-time high

Credit: Peter Heath

What: JB Hi-Fi Limited’s (ASX: JBH) share price rallied as high as $23.85 on Thursday taking the stock to within a whisker of the retailer’s all-time high of $23.94 which was set back in February.

So What: The rally in JB Hi-Fi’s share price – which has seen the stock race over 10% higher in just five days – has coincided with the group presenting at the Macquarie Australia Conference.

This conference is widely attended by fund managers and is often utilised as an opportunity for companies to update the market on their March quarter trading.

In JB Hi-Fi’s case the company did just that.

The group’s presentation began with a Trading Update which reported the following third quarter results:

  • Australian sales growth of 8.8% and same store sales (SSS) growth of 5.4%
  • New Zealand sales growth of 10.5% and SSS growth of 4.7%
  • Group quarterly sales growth of 8.6% and group SSS of 5.2%

Management went on to note that “we have continued to see good sales momentum in the second half.”

However, perhaps what pleased investors the most was the group’s full year guidance which stated that:

“We have a strong promotional plan for May and June and are well placed to cycle the strong comps in the prior year driven by the small business tax incentives. The company reconfirms its FY16 guidance of:

– Total sales to be circa $3.9 billion; and

– NPAT to be in the range of $143 million to $147 million.

Now What: Investing in the retail sector has certainly produced different results over the past year.

While JB Hi-Fi’s share price has rallied 23% over the past 12 months, Harvey Norman Holdings Limited (ASX: HVN) shares have gained just 7%, while Dick Smith’s shares have proven to be worthless!

Despite the record high share price and strong run up in JB Hi-Fi’s shares, the stock is still only trading on a trailing price-to-earnings multiple of 17 times. Relative to both the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and its consumer discretionary peers this multiple remains attractive.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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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