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Kogan (ASX:KGN) share price rises 9% on trading update

Early this morning, Kogan.com Ltd (ASX: KGN) provided the market with a business update in relation to its August performance. As a result, the Kogan share price surged to a high of $20.97 in the opening minutes of trade before pulling back. At the time of writing, the Kogan share price is up 8.58% to $20.88.

What does Kogan do?

Kogan operates a portfolio of retail and services businesses that includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Broadband, Kogan Insurance and Kogan Travel. The parent company is a leading Australian consumer brand renowned for price competitiveness through its digital offering.

Kogam.com focuses on making in-demand products and services more affordable and accessible to everyday consumers.

What’s moving the Kogan share price?

The Kogan share price has been on the rise as the online retailer announced active customers grew to 2,461,000 for the period ending 31 August. This represented an increase of 152,000, and the largest monthly increase in the history of the business.

In addition, the company noted that gross sales and gross profit soared by more than 117% and 165% year on year, respectively. This was underpinned by marketing costs which reflected the company’s largest monthly marketing investment

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 466% over the prior corresponding year.

Kogan advised it will provide the next monthly business update at its annual general meeting on 20 November.

Should you invest?

The Kogan share price has had an impressive run in the past 24 months. A shift in consumer behaviour towards online sales has seen the retailer’s revenues and profits soar. Since its March 2020 low, the Kogan share price is up over 500%.

With a market capitalisation of more than $2 billion, I think the Kogan share price is currently overvalued. Kogan has a price-to-earnings (P/E) ratio of 80.6 and a dividend yield of 1.01%.

Despite the current growing demand for online sales, I believe that Kogan’s phenomenal results will subside. Government support payments like JobKeeper and JobSeeker will soon be reduced and could affect online purchasing levels. In light of this, I will be searching for other opportunities in the market.

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Aaron Teboneras 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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