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Why the JB Hi-Fi share price keeps hitting record highs

The JB Hi-Fi Limited (ASX: JBH) share price hit a new record high on Friday as the Aussie electronics company’s shares continued to surge higher.

So far in 2019, the JB Hi-Fi share price has rocketed more than 61% higher to $34.75 per share (at the time of writing) and continually set new high watermarks along the way.

But, what’s causing the bumper year for JB Hi-Fi and its shareholders, and could there be time to buy before the year is out?

Strong earnings boost investors’ hopes

JB Hi-Fi reported its full-year earnings on 12 August in a result headlined by a 7.1% increase in net profit to $249.8 million for the year.

As you’d expect, CD and DVD sales continue to slide for the Aussie retailer but a strong end-of-financial-year sales push boosted full-year earnings and delivered a solid result for the group.

JB Hi-Fi shares climbed 10% higher on results day as shareholders appeared to take the strong result as a sign that the Aussie retail sector has some life left in it yet.

JB Hi-Fi has a strong online retail presence

One of the big factors in JB Hi-Fi’s favour is its existing online retail presence and the ability to generate significant sales outside of its bricks-and-mortar stores.

Rival Dick Smith had a significant amount of company assets tied up in its physical stores, which made it less nimble prior to its partial buyout by Ltd (ASX: KGN).

Indeed, Kogan itself has found success in its online-only electronics retail model as well as further diversification out of its electronics retailing roots.

The ASX has performed reasonably well

The S&P/ASX 200 Index (INDEXASX: XJO) has gained 21.1% so far this year following its best 6-month start to the year since 1991.

This, in turn, has boosted many of the ASX 200 stocks such as JB Hi-Fi higher, as momentum has kicked in and earnings have been relatively robust.

While the Australian economy remains intact, I’d expect to see many of Australia’s largest listed companies continue to deliver solid earnings and see their share prices push higher in 2020.

Should I buy JB Hi-Fi shares?

While I’m not personally looking to buy into the Aussie retail sector right now, I do also feel as though the JB Hi-Fi share price might be better value than Kogan shares at the moment.

Kogan shares closed last week at $6.24 per share, which translates to 34x earnings, whereas JB Hi-Fi shares are trading at just 16x earnings.

While this doesn’t necessarily mean they are undervalued, I do think that by specialising rather than diversifying, JB Hi-Fi shares can give you the retail exposure you’re looking for and allow you to diversify your own ASX portfolio elsewhere.

For those looking for some income prior to 2020, I'd suggest starting with these 3 high-yield stocks on the ASX.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. 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 Scott Phillips.

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