The Buhu (LSE: BOO) The share price has had a real rough time lately. The stock has fallen about 40% this year and 41% in the last 12 months.
Following this fall, the stock has returned to where it was in mid-2019, eliminating the stock market crash in April of the previous year.
Boohoo’s earnings and profits jumped, but the group’s shares fell. The company reported revenue of Rs 6,856m and net income of Rs 44m for 2019. For its 2021 fiscal year, total sales totaled about £ 1.8bn, and net income increased £ 9mm
In theory, Boohoo’s share price should track the company’s long-term underlying performance. Therefore, I do not think it unreasonable to say that since the group’s profits have doubled in the last two years, its share price should have achieved similar results.
Obviously, this did not happen.
The company has faced a tidal wave of challenges over the past two years, which seems to have attracted investors from the group’s growth story.
Recent challenges include delivery disruptions, rising costs and competition. All of this warns the company by the end of September that pre-tax profits have fallen by almost 64% in six months, despite a 20% increase in sales.
Because of this caution, Boohoo’s share price plummeted on the day it was released. Unfortunately, it doesn’t look like these challenges will disappear any time soon.
Production and transportation costs are rising across the economy. This is especially true for a company like Boohoo, which is always managed with a razor-thin profit margin. In 2021, the group reported only 5.2% of net profit.
What’s more, competition in this sector can keep companies from raising prices in order to maintain margins as costs increase.
Boohoo outlook for share price
Considering the above, what is the outlook for the company? I think the team will continue to experience increasing costs, increased competition and disruption for the foreseeable future.
This challenge is not unique to Boohoo. Almost every company has reported some kind of disruption in the last few months, and it will take some time to work through these challenges in the economy.
Boohoo share price has always been a rising investment and investors are willing to pay a premium to differentiate. Now that the story of growth is unpredictable, it seems that market views about stocks are changing.
Yet, despite the company’s confrontation, it remains a strong enterprise. It offers a strong reputation among consumers and a price, which many competitors may struggle to replicate.
These benefits will help the company get out of the slowdown to get the economy back to normal. In this case, and while I think the Boohoo share price will continue to face volatility in the near term, I would like to buy the stock as an investment in the long run.
Inflation is coming: 3 stocks to try and a hedge against rising prices
Don’t get me wrong … inflation is coming.
Some people are running in fear, but there is one thing we believe we should refrain from doing at any cost if there is inflation … and doing it Nothing
Money that just sits in the bank can often lose value every year. But for the wise savers and investors, Where It is a million dollar question to consider keeping their money.
That’s why we’ve created a brand new special report that explores our top 3 UK and US stock sharing ideas in an effort to make the best hedge against inflation.
… because no matter what the economy does, an intelligent investor will want their money to work For To them, inflation or not!
After all, we’re giving this report away for free today!
Rupert Hargreaves has no position on any of the shares mentioned. Motley Flower UK is recommended by Buhu Group. Opinions expressed in the companies mentioned in this article may differ from those of the author and therefore our official recommendation in our subscription services such as Share Advisor, Hidden Winner and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.