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Profit up 270% in FY21 YTD, is the Kogan.com share price a buy?

Kogan share price
Source: Kogan presentation

Is the Kogan.com Ltd (ASX: KGN) share price a buy after holding its annual general meeting (AGM) and revealing that its profit was up 270% in the year to date of FY21?

What is Kogan.com?

Kogan.com is an e-commerce business that sells a variety of products or services. It has an online marketplace where it sells a wide array of products like TVs, appliances, devices, furniture, food, toys, garden items, shoes, clothes and so on.

The company also sells a variety of other services like insurance, money products (like credit cards and superannuation), travel, cars, internet and mobile. 

Kogan.com also has a membership program called Kogan First which provides members with free shopping and some other benefits.

What was said at the AGM?

First, the company reminded investors about its performance in FY20 where net profit grew 55.9% and gross sales increased by 39.3%.

Kogan.com said that in the year to date for FY21 to October 2020, gross sales went up 99.8%, gross profit increased 131.7% and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 268.8%.

The company said that in the year to date, it has seen a strong performance from its product divisions and Kogan Marketplace. The company pointed out that November and December are typically the most important months of the year for the business.

It has been investing in its marketing to grow its customer base and brand, which it expects will have long-term benefits for the company.

The company also pointed that over the past four years it has delivered growth in the gross margin, contribution margin, EBITDA margin and adjusted EBITDA margin. In FY17 the adjusted EBITDA margin was 5.2%, in FY18 it was 6.3%, it FY19 it was 7.2% and in FY20 it was 10%.

Kogan.com also continues to launch new services for customers with partners. For example, in the first half of FY20 it launched Kogan Mobile NZ with Vodafone, Kogan Money Super with Mercer, Kogan Money Credit Card with Citi and Kogan Energy with Powershop (which is part of Meridian Energy Ltd (ASX: MEZ)).

Is the Kogan.com share price a buy?

The CEO and founder of Kogan.com, Ruslan Kogan, said with the FY20 report release: “There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously. For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online hopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com.”

Mr Kogan also referred to the benefit to the company of its growing number of people using its loyalty scheme: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

The Motley Fool Share Advisor service currently rates Kogan.com as a buy. According to estimates on Commsec, it’s trading at 29x FY23’s estimated earnings.

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Tristan Harrison 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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