The Premier Investments Limited (ASX: PMV) share price was on fire on Wednesday following the release of a trading update.
The retail conglomerate's shares ended the day 13% higher at $25.35.
At one stage, the Premier Investments share price was up almost 19% to a record high of $26.70.
How is Premier Investments performing?
Premier Investments' update revealed that its Retail business has been performing exceptionally well during the first half of FY 2021.
As a result, the company is expecting this side of the business to deliver earnings before interest and tax (EBIT) of $221 million to $233 million for the 27 weeks ending 30 January.
This will be up between 75% and 85% on the EBIT of $126.1 million it achieved during the 26 weeks ended 25 January 2020.
Management advised that this has been driven by strong like for like sales, a significant lift in higher margin online sales, and cost savings largely from rental reductions.
Is it too late invest?
One broker that believes it is too late to invest is Goldman Sachs.
According to a note out of the broker this morning, its analysts have retained their sell rating but lifted their price target slightly to $20.80. This price target implies potential downside of 18% from yesterday's close price.
The broker doesn't appear to believe that this strong form will last beyond FY 2021 and is forecasting a decline in earnings in FY 2022.
The broker is forecasting earnings per share of $1.40 in FY 2021 but then just $1.03 in FY 2022 and $1.09 in FY 2023. In light of this, it feels its shares are expensive compared to peers.
Goldman explained: "While the higher margin online sales is likely to be an ongoing structural benefit for PMV, the unique conditions driving the strong sales environment are, in our view, going to be difficult to sustain beyond FY21 as will be the reductions to operating costs. We estimate that GM expansion, operating leverage and the cost mitigating factors have all been material to this profit outcome."
"PMV looks reasonably priced on FY21E P/E of 18x compared to its 5-year average of 19.9x. However, on a sustainable profit basis, PMV continues to screen expensive vs. its peers, currently trading at 24.7x on a reported P/E basis and 22.1x when adjusted for the market value of its ownership of Breville Group (BRG: ASX) and Myer (MYR: ASX)," it concluded.
