In the share market there's currently a lot of debate among investors about whether you should buy growth or value shares. With value investors like L1 Capital that operate the $1 billion plus L1 Long Short Fund Ltd (ASX: LSF) complaining that growth stocks are at present "trading at the largest premium to the S&P/ASX100 in the last 30 years".
That maybe true and suggests some growth shares are too expensive, but what about if you could find a share that offers both growth and value?
Currently the retail sector is under a lot of selling pressure as investors worry about the effects of falling house prices on consumer confidence as net household wealth shrinks.
In fact one of Australia's most successful modern retailers in JB Hi-Fi Limited (ASX: JBH) may be offering an excellent buying opportunity based on today's share price of $23.39. Let's take a look at 5 reasons why.
- Value – JB Hi-Fi is currently selling for just 11.5x last year's earnings per share, which is cheap on conventional valuation metrics and below the market average.
- Growth – despite the low price-to-earnings multiple the group has a consistent track record of profit and dividend growth. For example dividends have grown from 83 cents in FY 2014 to $1.32 in FY 2018. Net profit has grown from $128 million to $234 million over the same period.
- Dividends – the stock also offers a yield of 5.6% plus the tax effective benefits of full franking credits to investors.
- Outlook – The group's CEO told its October 25 AGM that same-store sales for the were up 3.4% for Australia for the period July 1 to 30 September 2018. In New Zealand same-store sales are up 9.8%. Therefore it seems the group is continuing to perform well.
- Competitive position – After the demise of Dick Smith and its own acquisition of The Good Guys, JB Hi-Fi actually faces relatively little bricks and mortar competition. Of course it does face a lot of competition from online giants overseas which is probably why a large amount of its stock is short sold by speculators.
JB-Hi Fi could be a good buy then, but overseas competition could take its toll eventually….
