Yahoo Finance Should You Invest In The Retail Sector And Super Retail Group Limited (ASX:SUL)?
Super Retail Group Limited (ASX:SUL), a AU$1.81b small-cap, is a retail company operating in an industry impacted by the digital transformation for all retail channels. Physical store retailers faced the inevitable challenge of building up an online presence in order to enhance their omnichannel capabilities. Retail analysts are forecasting for the entire industry, a positive double-digit growth of 12.7% in the upcoming year , and a massive growth of 41.5% over the next couple of years. However this rate still came in below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Super Retail Group is a laggard or leader relative to its retail peers.
View our latest analysis for Super Retail Group
What’s the catalyst for Super Retail Group’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. Over the past year, the industry saw growth of 9.6%, though still underperforming the wider Australian stock market. Super Retail Group leads the pack with its impressive earnings growth of 26.1% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Super Retail Group poised to deliver a 20.7% growth over the next couple of years compared to the industry’s 12.7%. This growth may make Super Retail Group a more expensive stock relative to its peers.
Is Super Retail Group and the sector relatively cheap?
Retail companies are typically trading at a PE of 15.43x, in-line with the Australian stock market PE of 17x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 13.8% on equities compared to the market’s 11.9%. On the stock-level, Super Retail Group is trading at a PE ratio of 14.14x, which is relatively in-line with the average retail stock. In terms of returns, Super Retail Group generated 15.9% in the past year, which is 2.1% over the retail sector.
Next Steps:
Super Retail Group’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Super Retail Group has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Super Retail Group’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has SUL’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Super Retail Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
