Based on the results just published, Nick Scali (NCK) is not expensive with a PE of 17 and a free cash flow yield of 7.9 %. In particular when we relate it to the guidance of the company to increase its H1 FY 21 profit by 50 % to 60 %, due both to strong orders and further cost cutting. The main question is more the stability of the earnings for at least 2 reasons : - NCK largely benefited from government subsidies both on top line and on costs (3.9 m$ of jobkeeper subsidies). - not obvious to think that their orders will remain so good if the housing market continues to decline.
Anyway, the company seems to have some interesting potential of growth thanks to the start of their ecommerce business (which is expected to be profitable in FY 21) and acquisition opportunities. Also interesting to remind the high level of return of the company : ROE of 56 %.
NCK Price at posting:
$8.71 Sentiment: None Disclosure: Not Held
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