The Premier Investments Limited (ASX: PMV) share price climbed to a record high on Friday.
This followed the release of a trading update by the retail conglomerate.
What was in the update?
According to the update, Premier Investments' total global sales for the first 18 weeks of the second half were up 70% compared to the prior corresponding period. This was also up a decent 15.8% against the corresponding period in 2019, which was pre-pandemic.
Management advised that its strong growth was driven by a particularly strong performance during the all-important Easter School Holiday period. It also reported a record Mother's Day and May result.
In light of this, management expects its FY 2021 earnings before interest and tax (EBIT) to be in the range of $340 million and $360 million. This will be an increase of 82% to 92% year on year and 103% to 115% against FY 2019's EBIT.
Can the Premier Investments share price go higher?
According to a note out of Goldman Sachs, it believes the Premier Investments share price is overvalued at the current level.
This morning the broker retained its sell rating but lifted its price target to $21.10.
Based on the current Premier Investments share price of $27.44, this implies potential downside of 23% over the next 12 months before dividends.
What did Goldman say?
Goldman commented: "PMV has reported sales growth for the 18 weeks of 2H21 to be at 70% versus pcp and +15.8% vs. 2H19. This compares favourably to prior GSe of c.30.7% and +7.1% respectively for the half."
"We revise our earnings forecasts to reflect the stronger higher margin sales, more than expected number of stores in Smiggle and gross margin expansion in FY21. However, we expect this increased margins to normalize into FY22/23. Our revised FY21 forecast implies a pre-AASB16 EBIT of A$358.6mn at the upper end of the revised guidance range of A$340-360mn," it added.
Unfortunately, Goldman doesn't expect this earnings momentum to last. It is forecasting Premier Investments to deliver earnings per share of $1.68 in FY 2021, but then just $1.04 per share in FY 2022.
The latter means the Premier Investments share price is trading at a reasonably expensive 26x FY 2022 earnings today.
