The Kogan.com Ltd (ASX: KGN) share price could be an interesting one to consider right now.
E-commerce has seen a big boom over the last 12 months and Kogan.com has certainly benefited from that.
Over the last year the Kogan share price has risen just over 230%. That's a great return for just 12 months. But it has actually drifted quite significantly in recent weeks.
Since 25 January 2021, Kogan shares have actually fallen by 40%. You may or may not be surprised by that drop.
The FY21 half-year result included plenty of sizeable growth statistics. Gross sales grew 97.4% to $638.2 million and adjusted earnings per share (EPS) went up 211.7% to $0.35.
Kogan.com's board decided to increase the fully franked interim dividend by 113.3% to 16 cents.
But Kogan.com is focused on more growth over the next decade as it continues to invest in its logistics network, speed of delivery, range expansion and improved competition on the platform to drive even better experiences for customers.
Year on year, Kogan reported that its active customers grew by 76.8% to 3 million. Kogan First memberships scaled "significantly" during the first half of FY21.
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3 reasons why the Kogan.com share price could be worth looking at
New Zealand expansion
Whilst New Zealand is not as big as a market as Australia, expanding there increases Kogan.com's total addressable market.
Indeed, there may be less online competition in New Zealand than Australia because it's a smaller market. The acquisition is called Mighty Ape, one of New Zealand's largest online retailers with a focus on gaming, toys and other entertainment categories.
Mighty Ape was the highest ranking retailer on the 2020 Kantar customer leadership survey and it also won the most satisfied customers award for 2020 from Canstar. It had 719,000 active customers at the last public count.
Kogan.com has been integrating Mighty Ape into the business. Management said that December 2020 showed strong sales over the Christmas peak trading period with revenue of $20 million and gross profit of $5.4 million.
This acquisition also improves the Australian position through Mighty Ape's Australian websites.
Kogan says there's a significant opportunity to expand product offerings on both platforms and bring Kogan.com's marketplace capability to New Zealand. Management also said that it has attractive financial metrics with expected meaningful synergies across the combined businesses.
Steadily growing profit margins
Over the past four first-half financial periods, Kogan.com has achieved growth in its gross profit margin. In the first half of FY18 the gross profit margin was 19.4% and in the first half of FY21 it had risen to 27.3%.
The contribution margin in the first half of FY18 was 11.6%, by the latest result it had gone up 15.5%.
Kogan.com's earnings before interest, tax, depreciation and amortisation (EBITDA) margin has risen from 6.7% in HY18 to 9.4% in HY21.
These rising margins have allowed Kogan.com's profit growth in accelerate quicker than the revenue growth (which is growing quickly). If margins keep rising then Kogan.com can keep growing profit at a faster pace.
Kogan First members
Kogan First gives members a range of consumer benefits, which helps create a large and growing community of loyal customers who access free shipping, member discounts and other benefits.
Kogan explained that:
Kogan First members purchase on average much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings available through the loyalty program.
What's the valuation for the Kogan.com share price?
Forecasts are just predictions, but it might be useful to take them into account.
According to Commsec, the Kogan.com share price is valued at 18x FY23's estimated earnings. In FY23 it's projected to pay a dividend of $0.49, which translates to a grossed-up dividend yield of 5.4%.
