The S&P/ASX 300 Index (ASX: XKO) stock Temple & Webster Group Ltd (ASX: TPW) is one of the most exciting Australian businesses to buy, in my eyes.
It has suffered a huge decline in recent times, dropping by around 70% over the past six months, as the chart below shows.
I can see why some of the decline has occurred for the online furniture and homewares retailer – revenue growth has somewhat slowed, margins have decreased and it's pursuing growth in New Zealand.
There are three key reasons why I'd invest in the business – let's look at those.
Image source: Getty Images
Great tailwinds
One of the key reasons to like the business is because it is exposed to a strong, supportive tailwind.
Over time, the business is benefiting from ongoing online shopping adoption by households. All the business needs to do is maintain its market share of online shopping to see very pleasing growth for the foreseeable future.
Temple & Webster notes that online penetration for furniture and homewares in Australia and New Zealand trails global peers. In Australia, it's around 20%, compared to 29% in the UK and 35% in the US.
The ASX 300 stock suggested that Australia and New Zealand lag the UK and US by between five to seven years.
So, online penetration could rise from 20% in Australia right now to 30% over the next several years, which bodes well for Temple & Webster.
Temple & Webster also has a small but growing home improvement segment, where online penetration is only in the region of 5% to 10%.
Strong revenue growth
It's important to recognise that while the market has severely punished the ASX 300 stock, it continues to grow at a very good pace.
The most recent numbers were the trading update that was released with the FY26 half-year result.
Revenue for the period 1 January 2026 to 9 February 2026 was up 20% year-over-year, driven by both an acceleration of new customers and continued growth of repeat customers.
It also said its focus for the second half is to grow revenue and take market share as fast as it can, while delivering on its stated margin objectives with an operating profit (EBITDA) margin of between 3% to 5%.
The business is aiming for a medium-term goal of at least $1 billion in annual revenue, which will bring scale benefits on its own.
I think the company is on track to reach its $1 billion goal thanks to two growth initiatives.
Firstly, it recently launched in New Zealand, expanding the company's total addressable market by 10%, and it has enabled the majority of its catalogue for New Zealand customers.
Secondly, home improvement revenue is soaring – in HY26 it grew by 47% to $30 million, with private label penetration increasing to 25% (up from 18% in the first half of FY25). While it's only a small part of total revenue, that growth rate could help home improvement become an important slice of the pie in the coming years.
The ASX 300 stock could achieve compelling profit margins
In the short-term, the business is sacrificing some margin to continue to deliver growth.
But, in the longer-term, I think its profit margins will increase and the market is underestimating this.
Increasing in size alone will help some margins, particularly as fixed costs become a smaller percentage of revenue. In the long-term, fixed costs are expected by the business to be less than 6% of revenue (it was 10.6% in FY25).
Marketing costs are also expected to reduce to less than 11% of revenue in the long-term, down from 16.3% in FY25.
Ultimately, the business is aiming for an EBITDA margin of more than 15%, up from 3.1% in FY25.
According to the projection on CMC Invest, the business is projected to generate 22.8 cents of earnings per share (EPS) in FY28, which puts the Temple & Webster share price (at the time of writing) at 31x FY28's estimated earnings.
