Which is better to buy?

The ASOS (LSE: ASC) and Buhu (LSE: BOO) The share price is both the favorite of the stock market.

Unfortunately this year, companies have fallen out of favor. Each year, shares of Boohoo fell 46%, while ASOS fell 51%.

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Following this performance, I was attracted to both companies. These are the most efficient and fastest growing retailers in the UK. They have revolutionized the world of online fashion and led an e-commerce revolution across the industry.

However, if I have to buy one of these equities, one stands out to me as much stronger than the other.

ASOS share price progress

ASOS was the UK’s first driver in the digital fashion space. Investors could buy shares of the company for around Rs 20 when the internet was in its infancy right after the dot-com crash.

Since then, the company has expanded globally and redefined the e-commerce fashion market. But the team never used its first-mover advantage.

Profit and revenue growth has been slower than that of its rival Boohoo, which trades at the fast-fashioning end of the market. And following the company’s recent profit warnings, it doesn’t look like that will change.

ASOS’s revenue has grown 140% in the last five years, but Boohoo’s has grown 520%. It is true that the latter is in the early stages of growth. Its income is still half that of its larger peers.

Boohoo share price rises

Boohoo has been able to succeed where ASOS has failed by investing a significant amount in marketing collaborations (Boohoo’s mega celebrity has announced its biggest fashion collaboration of all time with Megan Fox). This has helped the company to capitalize on social media platforms. And this increase, in turn, provides additional capital for the acquisition.

That said, Boohoo share prices have come under pressure recently following allegations of poor working conditions at the company’s factories in the UK. These allegations have thrown a cloud over the group and tarnished its reputation.

By comparison, ASOS has no such respectable problem, although it has always struggled with razor-thin profits. This thin margin means there is almost no room for error in the group. Even a slight slowdown in revenue or an increase in spending can significantly affect the bottom line.

In fiscal year 2020, ASOS’s net profit fell to 3.4%, compared to Boohoo’s 5.2%.

Which is better to buy?

So both the ASOS share price and the Boohoo share price have their advantages and disadvantages.

However, in addition to ethical considerations, I would buy Boohoo for my portfolio. I think the company has a good track record of growth and as mentioned above, there is still plenty of room for growth. Its gross profit margin also provides additional capital for the group to achieve growth.

Nevertheless, due to the ethical considerations described above, I understand that the group may not be suitable for all investors.

Rupert Hargreaves has no position on any of the shares mentioned. Motley Fool UK is recommended by ASOS and Boohoo Group. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.

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