Why the Harvey Norman (ASX:HVN) share price just hit a decade-high

The Harvey Norman Holdings Limited (ASX:HVN) share price has just stormed to a record high. Is it too late to invest?

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The Australian share market may be dropping lower today but that hasn’t stopped the Harvey Norman Holdings Limited (ASX: HVN) share price from continuing its ascent.

In afternoon trade the retail giant’s shares are up 1% to a decade-high of $5.68.

This latest gain means the Harvey Norman share price is now up almost 19% since the start of 2021.

Why is the Harvey Norman share price at a decade-high?

Investors have been fighting to get hold of the company’s shares in recent months due to a very strong sales update in November and recent positive updates from its rivals. This has sparked hopes of a blockbuster half year result later this month.

In respect to its November update, the retailer revealed aggregated sales revenue growth of 28.2% between 1 July and 21 November compared to the prior corresponding period.

Management advised that this was driven by strong same store sales growth across almost all regions and particularly in the ANZ market.

Australian franchisees delivered a 30.4% increase in comparable store sales, whereas its New Zealand stores reported a 20.4% lift in comparable store sales. This includes stores that were temporarily closed due to COVID-19.

Pleasingly, thanks to margin expansion, Harvey Norman’s unaudited profit before tax grew 160.1% between 1 July and 31 October.

What is expected for the first half?

According to a note out of Goldman Sachs, its analysts are expecting Harvey Norman to deliver sales of $2,294.8 million and earnings before interest and tax of $634.7 million.

This represents a 26.2% and 105.8% increase, respectively, compared to the first half of FY 2020.

On the bottom line, Goldman expects its net profit after tax to increase 117.8% to $432.1 million. This is forecast to lead to an interim dividend of 20 cents per share, up 233.3% year on year.

Is it too late to buy Harvey Norman shares?

Goldman Sachs currently has a buy rating on the company’s shares.

However, it is worth noting that the recent rise in the Harvey Norman share price means it is now trading well ahead of the broker’s price target of $4.90.

One broker that still sees upside for the company’s shares is Macquarie. Last week it put an outperform rating and $6.00 price target on Harvey Norman shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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