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Down 20% in 2 months: Are Breville shares in the buy zone?

The Breville Group Ltd (ASX: BRG) share price has fallen over 20% since August and is now trading at its lowest level since February of this year. BRG shares are today swapping hands for $15.16 at the time of writing – a long way from the stock’s all-time high of $19.66 set in May.

But does this make Breville shares a buy today at these lower levels? 

Who is Breville Group?

Breville is a Sydney-based manufacturer and marketer of a range of home appliances. Through its Breville, Ronson and Sage brands, Breville sells everything from sandwich presses and toasters to air purifiers and espresso coffee machines. You might see their products stocked at your local Harvey Norman Holdings Ltd (ASX: HVN) or JB Hi-fi Ltd (ASX: JBH) stores.

Breville have done a marvellous job of cornering the high-end appliance market, which gives them very lucrative profit margins on their goods. This is quantified in the company’s share price history – any investors who bought BRG shares five years ago have received a nice 125% return since (before dividends).

Is Breville a buy today?

In its most recent earnings for FY19, Breville posted revenue growth of 17.5%, profit growth of 15.2% and a dividend pay rise of 12% – all stunning numbers that show me Breville is a top notch company. However, I still think Breville is a company with a top-notch share price as well (and not in a good way), even after the falls of the last two months.

The shares are trading for 29 times earnings, which looks very expensive to me. Breville is exactly the type of company that would get hit hard in a recession or economic downturn – buying luxury appliances would be one of the first things that consumers would put off or avoid if times got tough.

Foolish takeaway

I think the best time to buy a stock like Breville would be in a cyclical downturn, and not in today’s exuberant market. I’ll be putting Breville on my watchlist, but until the shares start showing some better value, that’s where it will remain for me.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.