The JB Hi-Fi Limited (ASX: JBH) share price has dropped 9% over the last month. Could that make the electronics retailer a buy after theoretically becoming better value?
Whilst the JB Hi-Fi share price has looked like a bit of a rollercoaster over the last 12 months, it's actually only down by around 3% in the past year. Since the bottom of the COVID-19 crash, the company has seen a sizeable recovery – it has risen almost 90% despite the recent decline.
What has happened for JB Hi-Fi within the last month?
Just under a month ago, JB Hi-Fi handed in its FY21 result.
The company shows that its total sales increased by 12.6% to $8.9 billion. Of that total revenue, $1.1 billion of the revenue was online – an increase of 78.1%. Its online offerings are supported by the supply chain and logistics capabilities.
It benefited from operating leverage throughout the business, which helped earnings before interest and tax (EBIT) increase by 53.8% to $743.1 million and net profit after tax (NPAT) went up 67.4% to $506.1 million.
The Australian divisions generated a large majority of the profit.
JB Hi-Fi Australia saw the cost of doing business decrease by 91 basis points to 11.2%. This helped its EBIT rise 33.6% to $523 million, with the EBIT margin improving by 142 basis points to 8.8%.
The Good Guys experienced a reduction of the cost of doing business by 100 basis points to 11.7%, thanks to store wages remaining well controlled. EBIT soared 90.2% with the EBIT margin improving 318 basis points to 7.9%.
The JB Hi-Fi share price has essentially fallen almost 10% since the release of its report and trading update.
If the result showed such strong growth, what was in the trading update?
Trading update
The retailer's sales for the first month and a half of FY22 were materially stronger than FY20, with each division reporting sales growth of at least 14.8%.
However, compared to FY21, sales were down. JB Hi-Fi Australia sales were down 14.6% and The Good Guys sales were down 8.1%, but JB Hi-Fi New Zealand sales were up 8.4% in New Zealand dollar terms.
Management said it remains an uncertain retail environment, particularly with COVID-19 and the related restrictions. But, the company continues to see heightened customer demand compared to two years ago.
Is the JB Hi-Fi share price good value?
JB Hi-Fi says that it is underpinned by five unique competitive advantages: scale, a low cost operating model, quality store locations, supplier partnerships and multichannel capability.
One of the brokers that has a optimistic price target on JB Hi-Fi is Credit Suisse, with a price target of $53.66. That suggests the broker believes the electronics retailer could see its share price rise almost 20% over the next year, if Credit Suisse is right.
However, the ongoing lockdowns in Australia's two biggest cities are expected to hurt FY22 revenue with restrictions expected to continue for the rest of the month.
Based on the broker's numbers, it's expecting the retailer to pay a grossed-up dividend yield of 6.5%. The JB Hi-Fi share price is valued at 14x FY22's estimated earnings.
