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Why the Kogan share price jumped 8% higher on Monday

One of the best performers on the All Ordinaries index on Monday was the Kogan.com Ltd (ASX: KGN) share price.

The ecommerce company’s shares finished the day an impressive 8% higher at $3.83.

Why did the Kogan share price surge higher on Monday?

With no news out of the company or broker notes that I’m aware of, it looks as though investors have been taking advantage of a sharp pullback in its share price over the last 12 months.

After all, despite Monday’s strong gain, Kogan’s share price has lost over half of its value since this time last year. It is down 55% over the period.

Why is the Kogan share price down 55% in 12 months?

There have been a number of catalysts for the sharp share price decline. These include heavy insider selling, increasing competition, and a softer than expected half year result.

In respect to the latter, Kogan had been one of the fastest growing companies on the ASX until FY 2019.

But due to a combination of slowing sales growth, increased investments in its brand, marketing, and operating infrastructure, Kogan reported a disappointing 11% decline in net profit after tax of $7.4 million in the first half.

Should you invest?

Kogan’s shares are currently changing hands at 25x trailing earnings, which is still a significant premium to the market average.

If the company can return to growth again in the second half and deliver a strong profit result, it could well prove deserving of this premium. But until I’ve seen proof of this, I intend to stay clear of the company’s shares and focus on other options in the retail sector that offer better value for money.

These include footwear retailer Accent Group Ltd (ASX: AX1), home furnishings retailer Adairs Ltd (ASX: ADH), and retail group Super Retail Group Ltd (ASX: SUL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group and 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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