3 strong reasons why the Cettire (ASX:CTT) share price could be a buy

Cettire could be one ASX share to look at for a few different reasons.

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The Cettire Ltd (ASX: CTT) share price could be a good one to think about for the longer-term for a few different reasons.

What is Cettire?

Cettire is a global online retailer that offers a large selection of personal luxury goods through its website. It sells over 160,000 products including clothing, shoes, bags and accessories from more than 1,300 luxury brands.

Here are three reasons why it could be worth thinking about:

E-commerce player with network effects

Cettire operates in the growth area of e-commerce. There has been a significant increase in the number of people who are shopping online after the many impacts of COVID-19.

The ASX e-commerce share can benefit from the growth of its business with the advantages of network effects. As it gets bigger, it becomes more attractive to shoppers and its profit margins can increase.

This ASX share is investing heavily to continue to improve its technology platform, enhance its supply relationships and improve the customer experience. Cettire has a goal of becoming a leading platform for all members of the luxury value chain.

Cettire is also investing in greater localisation features in selected markets, a mobile app and continued investment in AI and brand experience. Management say that these enhancements are expected to increase automation, improve the customer experience and support conversion rates to increase revenue growth.

Fast growth

Combine the above aspects of the business with its fast growth and it can be a winning combination.

Cettire reported a lot of progress in FY21.

Revenue and profit growth can be an important factor for the Cettire share price.

In the last financial year, reported sales revenue increased 304% to $92.4 million, whilst gross revenue rose 333% to $124.5 million. Around 40% of gross revenue came from repeat customers, up from 26% to FY20.

In constant currency terms, gross revenue went up 384% and sales revenue increased 352%.

The company is generating operating profit at different levels of the financials. It reported a product margin of 37% and a delivered margin of 24%. The delivered margin rose by 243% to $22 million.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $2.1 million.

Operating cashflow surged 131% to $12.7 million thanks to its capital light model.

The statutory result was almost a profit, with a statutory loss of $0.3 million.

In July 2021, the first month of FY22, gross revenue increased 181%.

New product categories and growing reach

Cettire is steadily expanding in multiple areas that could drive the business forwards in the coming years. This could help the Cettire share price into the future.

Active customers rose by 285% to 114,830 people. It has commenced direct partnerships with brand owners, though this isn’t expected to be material in FY22.

It’s trying to make the buying experience more attractive for potential customers with free returns, if that’s what they want.

Cettire also expanded its addressable market through the entry into the children’s wear segment.

Dean Mintz, the founder and CEO of Cettire, said:

There is a significant market penetration opportunity ahead for Cettire. A key objective in pursuing our IPO was to unlock new and incremental growth opportunities, and the results over the past 12 months have proven our ability to deliver on our strategy.

Should you invest $1,000 in Cettire right now?

Before you consider Cettire, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Cettire wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Cettire Limited. The Motley Fool Australia has recommended Cettire Limited. 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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