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All-time high! Here’s why the Baby Bunting (ASX:BBN) share price is soaring today

hands throwing smiling baby up in the air representing rising baby bunting share price
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The Baby Bunting Group Ltd (ASX: BBN) share price is on fire today. Baby Bunting shares started out at $4.49 this morning, but have soared 4.45% at the time of writing to $4.69 a share. Earlier in the trading day, Baby Bunting shares hit their new all-time high of $4.77, which means (at that price) Baby Bunting has given investors a return of more than 300% since 23 March, and more than 42% for 2020 so far.

What is Baby Bunting?

Baby Bunting is a retailer focused on ‘everything baby’. It has more than 50 stores around the country (as well as a strong online presence) and sells products ranging from prams and toys to manchester and car seats. The company has been around since 1979, but only recently joined the ASX boards (almost exactly 5 years ago). Since listing on 16 October 2015, the Baby Bunting share price has gone from $1.86 to today’s $4.66, meaning inevstors have enjoyed share price growth of around 150% over the past 5 years.

Why is the Baby Bunting share price at an all-time high today?

Even though the Baby Bunting share price is at a new all-time high, there is no obvious reason why today, with no major announcements coming out of the company this month so far.

As such, I think we can put today’s moves down to the general positive sentiment that has been swirling around this company since it reported its full-year earnings last month. On 14 August, Baby Bunting told the market that its revenue for the 2020 financial year was up 11.8% (including a near 40% rise in online sales), with profits rising by 34.1%.

Since 13 August, Baby Bunting shares are up clsoe to 25%, so I think the moves we are seeing today are just a continuation of this trend.

Is Baby Bunting a buy today?

Baby Bunting is without a doubt a top quality company with promising growth prospects and an impressive track record. It has managed to grow into its own niche in a very effective manner. Its online platform is also impressive, and it was good to see such a strong takeup of online sales during the worst of the national coronavirus lockdowns last financial year.

That being said, I’m not too wild about the Baby Bunting share price today. The company does offer a decent trailing dividend yield right now of 2.24%. However, the company is also being priced with a 63.7 price-to-earnings (P/E) ratio, which is not at a comfortable level in my opinion.

This is a growing company to be sure, but 63.7 is a very high P/E ratio that I’m not sure the company can live up to for the long-term. As such, this is a share that’s staying on my watchlist for now.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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