How do you value the JB Hi-Fi share price in June?

What are JB Hi-Fi shares worth today?

| More on:
Woman looking at prices for televisions in electronics store representing increasing sales yet adecline in the JB Hi-Fi share price over FY22

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • JB Hi-Fi shares have slumped since the beginning of May, registering a yearly low of $36.69 last Friday 
  • The retailer's shares have a price-to-earnings ratio of 9.34 which is more expensive than its nearest competitor, Harvey Norman 
  • The high P/E ratio means that investors are willing to pay more for JB Hi-Fi shares 

The JB Hi-Fi Limited (ASX: JBH) share price tumbled to a 52-week low of $36.69 last week.

The retailer has been hammered by external factors beyond its control which has put selling pressure on its shares.

At Wednesday’s market close, JB Hi-Fi shares finished 0.41% lower to $39.37.

You may be wondering what’s the best way to value a company in the current climate. Here’s one way.

How do you value JB Hi-Fi shares?

A common way among investors to determine if an ASX share is cheap or expensive is to look at the price-to-earnings (P/E) ratio. This metric tells you how much the company is worth.

A P/E ratio can be broken down as the relationship between a company’s share price and its earnings per share (EPS).

At the time of writing, JB Hi-Fi has a P/E ratio of 9.34. The formula to work out the P/E ratio is the current share price divided by EPS.

For context, JB Hi-Fi’s peers, Harvey Norman Holdings Limited (ASX: HVN) and Kogan.com Ltd (ASX: KGN) hold a P/E ratio of 5.71 and 169.49, respectively.

Due to the similar market capitalisation compared to Harvey Norman, JB Hi-Fi shares are slightly on the more expensive side.

Essentially, what this means is that you are paying $9.34 for every dollar that JB Hi-Fi collects in earnings.

In addition, a P/E ratio shows how much growth can be expected when invested in a company.

For example, a high P/E ratio tells us that investors are happy to pay more per share than what the company is earning. This is extremely common with new market entrants that have the liquidity to pursue high growth opportunities.

On the other hand, a low P/E ratio is more suited to stable companies that have an established market share. It could also mean that its shares are trading at a bargain given the share price fall.

JB Hi-Fi share price summary

Since the start of May, the JB Hi-Fi share price has plummeted 25% on the back of weakened investor sentiment.

Soaring inflation levels mixed with rate hikes by the Reserve Bank of Australia have sent investors fleeing for safe-haven assets.

Shares in a retail environment are always the first to feel the impact of any economic downturn.

JB Hi-Fi has a market capitalisation of approximately $4.32 billion and has roughly 109.33 million shares on issue.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman Holdings Ltd. and Kogan.com ltd. The Motley Fool Australia has positions in and has recommended Harvey Norman Holdings Ltd. and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

An older couple come together in their warm heated home with fire cracker sparklers.
Retail Shares

50% off: Why I think this ASX All Ords share could be a sparkling buy

With its share price cut in half this year, there are three reasons why I like this ASX retail share.

Read more »

A businessman slips and spills his coffee.
Share Fallers

Adore Beauty share price slips 12% following ASX speeding ticket

What went down with Adore Beauty on Wednesday -- other than its share price.

Read more »

Three happy shoppers.
Retail Shares

Why are ASX 200 retail shares having such a stellar run today?

ASX 200 retail shares are on fire today. What's put a rocket under this ASX 200 sector?

Read more »

A young woman in a shop hands her credit card to the cashier
Earnings Results

Super Retail Group share price jumps 8% on soft FY22 results

The retail group has announced mixed results to the market this morning.

Read more »

A smug executive woman wearing glasses and red lipstick blows a kiss to herself as she takes a selfie in a cafe feeling happy about the Adore Beauty share price going up today
Retail Shares

Why is the Adore Beauty share price rocketing 19% on Tuesday?

Could earnings from its peer be behind the stock's gain?

Read more »

A young woman does her Christmas shopping online in her lounge room at home with a Christmas tree in the background.
Retail Shares

Kogan share price drops amid warehousing legal battle

A warehouse legal battle is the latest headache for Kogan shareholders.

Read more »

A hipster looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Retail Shares

Could this ASX 200 share be heading for a short squeeze?

JB Hi-Fi shares could rocket next week if this expert is to be believed...

Read more »

Confused baby.
Earnings Results

‘Our future is looking bright’: Baby Bunting share price slips despite earnings milestone

The company's total sales surpassed $500 million last financial year.

Read more »