ASX stock of the day: Michael Hill (ASX:MHJ) shares shoot up 10%

The Michael Hill International Ltd (ASX: MHJ) share price is on fire today, up near 10%. Here’s what might be going on with the jeweller.

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The Michael Hill International Ltd (ASX: MHJ) share price is having a fantastic day today. Michael Hill shares are, at the time of writing, up 9.86% to 78 cents a share after closing at 71 cents yesterday and opening at 73 cents a share this morning.

Today’s move is the latest in what has been a very good month for Michael Hill shareholders so far. On top of a very good 2021 and an outstanding 12 months. Michael Hill is now up more than 11% year to date and more than 23% since the start of April. The shares are also up a mouth-watering 117% over the past 12 months. In saying that, Michael Hill is still a ways off of the $1.71 per share levels we were seeing back in 2016, so it hasn’t been an unbridled success story for long term investors.

So who is Michael Hill International? And why are the shares rocketing today?

When diamonds are a shareholder’s best friend

Michael Hill International is a chain of jewellers. The company owns a string of 289 jewellery stores across Australia, New Zealand and Canada. The company was started by the eponymous Michael Hill in New Zealand back in 1979. It listed on the New Zealand Stock Exchange in 1987, and the ASX in 2016. The company expanded into the Australian market in 1987, and the Canadian market in 2002.

Michael Hill was a company that managed to weather the COVID storm rather well last year. In its most recent earnings update back in February, the company reported an 82.1% bump in net profits after tax for the 6 months to 27 December 2020. That was fuelled by a 67% increase in earnings before interest and tax (EBIT), and a 6.3% rise in same-store sales growth.

All of that came despite the jeweller losing 3,709 store trading days as a result of lockdowns, which Michael Hill estimated cost the company $23 million in revenues. 

Why are Michael Hill shares glinting today?

As we touched on earlier, Michael Hill shares are having quite the day today. Normally, a rise of near-10% is sparked by some big news or announcement from the company. But alas, today we have had no such news. The company’s last major announcement was back on 9 April. And that was just some routine paperwork.

In fact, there is no obvious reason at all why Michael Hill shares are rocketing. There are two possible reasons we can speculate on today though. The first is that a share market broker or other investing firm has rated Michael Hill as a buy or upgraded their outlook on the company.

The second is that a major institutional investor has taken out a position in Michael Hill shares. Seeing as this company has a market capitalisation of just over $300 million on recent pricing, it wouldn’t take much for a large purchase of stock to push the company’s share price up. 

ASX trading data shows a significant uptick in Michael Hill share trading today. Almost 526,000 shares have swapped hands today, significantly higher than the 5-day average of ~140,000, let alone the 88,000 that traded on Monday. 

Whatever the cause, it has certainly been a good day for Michael Hill International shareholders today.

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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. 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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