Is the Harvey Norman share price in the buy zone?

After the recent price increase, I still see a lot of value

Harvey Norman Holdings Ltd (ASX: HVN) caught the attention of investors last week as the company's share price lifted on the back of its half-year results.

Positive news from the company highlighted a 6.6% revenue increase over the prior corresponding period to $2.29 billion.

That revenue boost of $141.54 million saw profits before tax increase by $116.71 million, or around 41%, to land at $400.49 million for the half. 

While the company's retail arm produced the lion's share of its revenue, contributing $1.49 billion or more than 60%, its other revenue streams significantly impacted the bottom line.

Harvey Norman has grown considerably since starting as a single store at an outer Sydney shopping centre in 1982. It has a current market cap of $6.63 billion and stores across Asia and Europe.

In addition to its well-known retail brand, Harvey Norman also generates income from its franchise and property operations.

And the company's Australian property portfolio benefitted from a $88.41 million revaluation increase, compared to a $5.12 million decrease in the previous half.

As such, the company's 41% profit before tax increase, or $116.71 million, seems far less impressive when the $88.41 million property revaluation increase is considered.  

The Harvey Norman share price has since levelled off after bouncing more than 4% on Friday to settle at around $5.20 at the time of writing.

A husband and wife dance with their young daughter in their lounge room.

Image source: Getty Images

Are Harvey Norman shares a buy?

There is a lot to like about Harvey Norman. The company has steadily grown its net assets over the past 5 years by around $1.5 billion to its current value of $4.72 billion.

The company also stated that its debt-to-equity ratio is around 12%, indicating that it is managing its debt well.

As such, Harvey Norman looks well-placed to push ahead with its expansion plans in Australia and beyond.

And if the company can successfully progress with those ambitious expansion plans, particularly in Malaysia, where it saw an increase in sales of 8.4% over the half, exposure to the growing Southeast Asian market presents an opportunity to increase its revenues.

However, with the company announcing that its plans to open up to 10 stores in Malaysia over the financial year have been hampered, and it now plans to open just 4 stores in the country over FY25, expectations on that front will need to be tempered.

The current Harvey Norman share price still represents value; for me, it remains a tentative buy.

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

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