MENU Ltd shares drop lower on trading update

It rarely has been the case over the last 12 months, but the Ltd (ASX: KGN) share price has been amongst the worst performers on the market on Monday.

In afternoon trade the fast-growing e-commerce company’s shares have dropped 4% lower to $6.52.

Why are Kogan’s shares lower?

Today’s decline is attributable to a quarterly cash flow statement and trading update released before the market opened this morning.

According to the release, the company ended the second-quarter of FY 2018 with cash of $28.2 million, compared to $25.8 million at the end of the previous quarter.

This was largely the result of another strong increase in revenue over the last three months.

At its annual general meeting management advised that year-on-year its revenue growth stood at 36.2% and EBITDA growth was 58.3% higher as of the end of October. Pleasingly, this morning management has advised that its growth has accelerated during November and December.

This ultimately led to a net operating cash flow of $4.2 million for the quarter despite a heavy investment in inventory in the build-up to Christmas.

Unfortunately, though, the company has not given anything away when it comes to margins, which could partly be the reason for today’s decline. Considering the sky-high multiple that Kogan’s shares trade at, investors will want to know that earnings are growing at an acceptable (and strong) rate.

Looking through the cash flow statement I do think there are signs of margin expansion, however this will not be known for sure until the release of its half-year results in February.

In light of this and the significant growth being built into its share price today, I think it would be prudent to wait for that release before making an investment.

In the meantime, retail shares such as Lovisa Holdings Ltd (ASX: LOV), Premier Investments Limited (ASX: PMV), and Noni B Limited (ASX: NBL) could be worth a look.

Alternatively, here are three quality blue chip shares that I think are in the buy zone today.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended ltd. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!