The Kogan (ASX:KGN) share price is up 180% in 2020: Is it still a buy?

The Ltd (ASX:KGN) share price has been in sensational form in 2020. Is it too late to buy the ecommerce company’s shares?

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Kogan share price

Source: Kogan presentation

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The Ltd (ASX: KGN) share price continued its remarkable run on Wednesday and stormed higher again following the release of its latest business update.

The ecommerce company’s shares climbed as much as 9% to $20.97.

When the Kogan share price hit that level, it meant they were up a massive 180% since the start of the year.

Why is the Kogan share price up 180% in 2020?

Investors have been fighting to get hold of the company’s shares this year after the pandemic accelerated the shift to online shopping.

After a reasonably underwhelming first half to FY 2020, Kogan delivered a blockbuster full year result with stellar sales and profit growth.

For the 12 months ended 30 June 2020, Kogan reported a 39.3% increase in gross sales to $768.9 million and a 57.6% increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to $49.7 million.

This was underpinned by a 35.7% increase in active customers to 2,183,000. 

Can this strong form be maintained in FY 2021?

With its full year results, management noted that a “retail revolution [is] taking place” and believes the company is well-positioned to benefit.

Pleasingly for shareholders, this has so far proven to be very accurate in FY 2021. Although the majority of retail stores are open as normal in Australia, Kogan’s sales and earnings growth remains explosive.

This morning the company released its update for August and revealed that its gross sales grew more than 117% year on year during the month.

Things were even better in respect to its earnings. Kogan’s EBITDA grew by more than 466% over the prior corresponding period. This was despite a significant increase in its marketing costs.

Also growing strongly was its active customer numbers. During August, Kogan added an incremental 152,000 active customers. This brought its total customers to a sizeable 2,461,000. Management notes that this is the largest monthly increase in its history.

Is it too late to invest?

While Kogan is far from a bargain buy at 44x estimated FY 2021 earnings, I feel it is still a great long term option.

I believe the shift to online shopping still has a long way to go and Kogan is well-placed to benefit. It also has the option to accelerate its growth in the future with value accretive acquisitions following its capital raising this year.

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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