Here’s why I think the Harvey Norman share price has further to run in 2021.
Why the Harvey Norman share price is climbing
Strong earnings has been the key to a surging Harvey Norman share price.
The Aussie retailer reported a record full-year earnings result with $8.46 billion in FY20 sales revenue. Underlying net profit after tax climbed 30.9% to $462.2 million with operating cash flow of $1.1 billion.
That saw the company pay a fully-franked 18 cents per share dividend to be paid on 2 November.
The Harvey Norman share price is yielding a tidy 4.3% right now. That’s a pretty good return given the challenges facing many Aussie companies right now.
Why the ASX retail share has further to run
A persistently high Aussie dollar could be good news for the Harvey Norman share price.
The Aussie retailer is a net importer of products. That means a strong domestic currency makes those purchases relatively more cheap and profit margins can be boosted.
I still think there is also further room for sales volumes to grow. Aussies stocked up on home office electronics when the coronavirus pandemic began but I think we could see further investment.
However, a shift in working arrangements could see more housing activity. With more Aussies moving residences, the demand for a suite of electronics could surge.
It’s interesting to note that Harvey Norman has started the year strongly in FY21. That includes an uptick in sales for July and August with overseas sales recovering quickly.
Is it all good news?
Harvey Norman still faces some intense competition. That’s especially the case with Kogan.com Ltd (ASX: KGN) continuing to make big strides.
It’s tough to predict what FY21 will hold for the retail sector. Harvey Norman does have a strong online presence which may help mitigate some of the impact from COVID-19 restrictions.
I think the 10.8 price to earnings (P/E) ratio and 4.3% dividend yield still make the Harvey Norman share price worth a look in 2020.
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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended 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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