From their 12-month low in May 2015, shares in boohoo.com (LSE: BOO) have climbed by 73% to 44p, but is more to come? More traditional clothing stores like Marks & Spencer are struggling (M&S’s Q4 performance in clothing was “unsatisfactory“). But online vendors are doing much better than I’d expected — I might be old-fashioned, but I always thought touch and feel was an essential part of the transaction.
Results from boohoo should be with us on 26 April and should be good with analysts expecting a 46% rise in EPS. They have further gains above 20% per year pencilled-in for the next two years. But one thing that still leaves me wary is the volatility of the share price — since floatation in March 2014, the shares are actually down 39%. I’m also keenly aware of the ups and downs that ASOS shareholders have faced. Over five years those shares are up 62%, yet if you’d been unlucky enough to buy at their peak in February 2014, you’d be down 53%.
There’s a bit of a “dotcom bubble” feel about boohoo (and ASOS) to me, with boohoo shares on a forward P/E of 25 as far out as February 2018 (though it’s a lot lower than the multiple of 47 for ASOS based on August 2017 forecasts), and that puts me right off. But I’m an old bloke and I buy my shares the way I buy my clothes — conventional stuff that I intend to keep for years — so what do I know?
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Shiny shiny
If you’d bought Randgold Resources (LSE: RRS) at their low point in September 2015, you’d be sitting on a nice gain of 81% right now as the shares have reached 6600p. That’s on the back of the rising price of gold, which has reached the $1,200 level per ounce from only a little over $1,000 in December.
Buying mining shares is a good way of gearing up the profits you can make over buying the metal itself — every percentage rise in the price of gold represents a bigger percentage rise in a miner’s profits once it has cleared the cost of production. Of course, the same works in reverse and a gold price fall is geared up to a bigger percentage fall in miners’ profits.
What I don’t like about Randgold shares is their high forward P/E of 37, dropping only as far as 31 on 2017 forecasts, because that suggests there’s a fair bit more gold price growth built into the share price. I reckon trying to guess where something as fundamentally useless as gold is going is a waste of time.
Health profits
NMC Health (LSE: NMC) has been a growth star, with a 69% rise since last April’s peak to 1120p, and a 390% gain over five years. And for once, I’m seeing a growth share that I actually like the look of. NMC operates a healthcare chain in the United Arab Emirates, where oil wealth has produced plenty of customers who want top medical treatment — as shown in several years of accelerating earnings growth.
What’s more, we have an EPS rise of 58% forecast this year, followed by 23% next, and that would drop the P/E to just 16. We’re also looking at PEG ratios (which compare the P/E with the growth rate, the lower the better) of 0.3 this year and 0.7 next — and that’s firmly in the territory that would have excited the growth investor in a younger me.
