I hate to admit it, but ASOS was a stock I passed by when it traded at 5p in 2005. It has since blown all expectations out of the water. Turnover since then has rocketed from £14m to an amazing £150m forecast for this year, while margins have improved to a healthy 9%, ROCE a giddy 55%, and cashflow for the last year end over double reported profits.... where are the flaws... ?
asos.com is the UK’s leading online fashion store. There are over 9,000 products online. The site attracts 3.3 million shoppers a month. It is aimed at young men and women aged 16-34. asos.com has 250 employees and over 32,000 square metres of storage space and an email newsletter going out to 2million people a month. The potential for further growth is still there, and with the high street completely decimated, ASOS looks perfectly pitched to steal further slices of the pie....
I read in the FT that sofa.com has seen sales balloon in 2008 as high street shoppers have sought bargains, ASOS is similarly placed in the fashion world. they reported robust first half figures and the first 7 weeks of H2 show sales up 107% on last year.
So where's the downside... well it's a bit pricey at 19 times expected earnings... and TKMaxx is going to launch a transaction based website, so the competition is going to come in to eat up at those margins and add pricing pressure.
The chart has topped out, but still looks to be sustaining an uptrend and is still showing considerable relative strength... it's worth watching as this is the kind of stock that could double again if the market rallied for 12 months.... it's in the right sector, ticks the right boxes, and could well see a further boon to sales as shoppers seek bargains.
