I think that the share price of Kogan.com Ltd (ASX: KGN) is a buy for the long-term at today's price, particularly amid the problems with the coronavirus.
Kogan.com is one of those companies that really divides opinion. People either think it's great or terrible, or shift between the two depending what the latest result was.
Since 17 January 2020 the Kogan.com share price is down 44%. I think almost any business could become a buy if its price goes cheap enough. I think Kogan.com is a buy today, it's cheap and a pretty good business.
That last result
Kogan.com said that its gross sales grew by 16.4% to $322.9 million, however revenue was down 5.3% to $219.5 million because only the seller fees from Kogan Marketplace is recognised as revenue.
Gross profit increased by 10.6% to $49.9 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 35.2%, net profit rose 20.8% to $8.9 million and the active customer base increased 10.2% to 1.7 million.
It grew the interim dividend by 22.9% to 7.5 cents per share, and finished with cash of $34.1 million.
It may not have been an incredible result. The coronavirus is causing supply chain worries which could lead to sustained closures or delays of orders from international suppliers and manufacturers of its products.
Why is it good value today?
Businesses like Kogan.com go through sentiment shifts quite regularly. The 10-year outlook and value of a business shouldn't change its price too much every six months. Yet Kogan.com's share price is very volatile.
I think any investment that can deliver a return of more than 10% a year for the next five or more years is worth keeping an eye on.
Kogan is making sure its shareholders get a good cash return with its dividend – and that dividend is growing every year. Its yield is currently 3.5%, or 5% grossed-up. That's already a good portion of the required return, assuming the dividend isn't cut.
The business continues to grow its customer base, add more sellers and add more services. It even sells toilet paper. Being able to go to an Australian site which offers cheap prices across the board is an attractive proposition for customers. Online shopping could actually see a boost in the coming weeks if more people decide to stay home.
It's valued at just 19x FY21's estimated earnings with analyst expectations of earnings growing by 10% a year to 2022.
Over five years or ten years I think Kogan.com could comfortably beat the ASX, particularly with dividends included in the return.
