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The Kogan share price tripled in value in FY 2020

The Ltd (ASX: KGN) share price is on course to end the financial year with a bang.

In afternoon trade the ecommerce company’s shares are up a sizeable 5% to $14.60.

If Kogan’s shares finish the day at this level, it will mean a gain of almost 200% over the financial year.

Why has the Kogan share price tripled in value in 12 months?

Interestingly, as recently as the start of February, Kogan’s shares were actually trading lower compared to the beginning of the financial year. It has only really been in the last three months that its shares have taken off.

The catalyst for this was a very impressive business update in April which revealed that the closure of retail stores because of the pandemic had been a major boost to its ecommerce business.

That update revealed that during the third quarter, Kogan grew its sales by 30% and its gross profit by 23%. Importantly, it was the final month of the quarter that did the heavy lifting. March sales and gross profit increased by over 50%.

Since then it has been onwards and upwards for the company. In April Kogan’s sales more than doubled and its gross profit jumped over 150%.

Then at the start of June, the company’s sales were up over 100% and its gross profit was up over 130% quarter to date. Growing even strongly was its adjusted EBITDA, which increased by more than 200% quarter to date. This was despite the company investing heavily in building its brand and growing its active customers.

The latter certainly has paid off. Kogan’s active customers increase to 2,074,000 at 31 May 2020, this was up 29% from 1,609,000 active customers at the end of FY 2019.

Capital raising.

Another driver of its strong share price gain was its $115 million capital raising.

While capital raising can often weigh on a company’s shares, this one went down well with investors. This is because it is decided to raise funds to give it the financial flexibility to act quickly on future value accretive opportunities.

Is it too late to invest?

I think Kogan has the potential to grow materially in the future thanks to the shift to online, its strong market position, and expansion/acquisition opportunities.

In light of this, I would still class it as one of the best buy and hold options on the ASX, even after its strong gains in FY 2020.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ltd. 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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