The Harvey Norman Holdings Limited (ASX: HVN) share price could be in the buy zone.
That's the view of the team at Goldman Sachs, which has responded positively to the retail giant's half year results.
What did Goldman say?
According to the note, Harvey Norman delivered a half year result ahead of the broker's expectations.
It commented: "HVN delivered 1H22 sales growth of +1.7% to A$2.34bn, +5.2% vs. GSe and group EBIT at +13.6% vs. GSe on an underlying basis, after adjusting for property revaluation and interest income. The results were a broad based retail beat across Australia, NZ as well as key international regions, largely driven by strong margin execution."
Pleasingly, the broker notes that this strong form has continued into the second half, which has led to its analysts upgrading their estimates.
Goldman explained: "Trading into early 2H22 remained positive vs. GSe, reporting strong double digit growths on a 2 year basis across all regions excl. Asia and Slovenia and Croatia on a comparable basis. In Australia, the underlying 2 year trend improved to 23% comparable growth vs. 15.9% into mid November and +17.1% in December."
"We revise earnings forecasts for HVN to factor in the 1H22 results. Regionally, we revise FY22 Australia earnings the most, by +13.6%, as the 1H22 EBIT was significantly ahead of GSe, largely due to the continued absence of tactical support, in our view, given the strong trading environment," it added.
Is the Harvey Norman share price good value?
Goldman believes the Harvey Norman share price is good value at the current level, particularly in comparison with rival JB Hi-Fi Limited (ASX: JBH). In addition, it notes that its shares offer a generous yield at current levels, boosting the total potential return.
The broker said: "HVN continues to trade at P/E 1.5x lower than JBH. On a property adjusted basis, HVN currently trades at 6.5x FY22e P/E vs. JBH at 12.4x. Our 12m Target Price for HVN remains unchanged at A$6.00, implying an upside of 16.5% and total return of 24.6% [including dividends]. We maintain our Buy rating on HVN."
