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Kogan.com Ltd (ASX:KGN) shares drop lower on trading update

Source: Kogan presentation

It has been a disappointing day of trade so far for the Kogan.com Ltd (ASX: KGN) share price.

In morning trade the e-commerce company’s shares are down over 7% to $6.15.

Why are Kogan’s shares sinking lower today?

This morning Kogan released its latest quarterly cash flow statement and provided the market with a trading update.

According to the release, the company ended the fourth quarter of FY 2018 with cash of $41.99 million after producing net operating cash flow of approximately $24.5 million during the period.

The solid fourth quarter performance led to unaudited revenue growth of “greater than 40%” in FY 2018. Considering revenue was $289.5 million in FY 2017, this would indicate revenue of at least $405 million this year.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew at a quicker rate during the year. Its unaudited EBITDA growth was greater than 90% according to management. This means EBITDA of at least $23.7 million following last year’s result of $12.5 million.

A key driver of this growth has been a significant rise in the number of active customers. This has risen to 1,388,000 customers as of the end of June, up 45% on the prior corresponding period’s 955,000 customers.

Kogan.com founder and CEO Ruslan Kogan appeared rightfully pleased with the company’s performance in FY 2018.

He stated that: “Kogan.com finished the financial year with a strong quarter of continued growth, as we execute our long term strategy. We are excited about all the growth initiatives we are implementing, as we continue to make the most in-demand products and services more accessible and affordable for our customers.”

Should you buy the dip?

I thought this was a strong finish to the year and the result was in-line with expectations.

While there is no doubt that Kogan’s shares are trading on a sky-high earnings multiple, I believe this update demonstrated why it is worthy of the premium.

Unlike struggling retailers such as Harvey Norman Holdings Limited (ASX: HVN), JB Hi-Fi Limited (ASX: JBH), and Myer Holdings Ltd (ASX: MYR), Kogan is growing its earnings at an explosive rate and looks set to continue doing so over the coming years.

Because of this, I think it could be a great long-term buy and hold investment option.

As well as Kogan, these top blue chip shares could be in the buy zone today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com 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 Scott Phillips.

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