Stock of the Week: Temple and Webster

Stock-of-the-week-July-31

Market darling online homewares and furniture retailer, Temple and Webster was hit hard this week despite reporting revenue up 138 per cent since the start of FY21.

While the company continued to benefit from a consumer shift to online shopping, the market clearly believed the stock was running a too hot.

October revenue was up 100 per cent, with EBITDA higher to $8.6 million with contributing margins also ahead of target. However, no guidance has been given for the remainder of the half or full year.

The retailer has been one of the stars of the COVID-era on the share market, I asked Andrew Page from Strawman.com and Michael Wayne from Medallion Financial, what they make of TPW’s latest result and if this trend will continue to grow. Andrew likes the business, saying it has grown from strength to strength.

“Scaling issues heal all wounds. It has got this wonderful capital-light model, a change from the traditional retail model. What an amazing business!

“They are knocking it out of the park. For me, it really comes down to the valuations and its really hard as this kind of businesses always looks expensive. This one seems to tick a lot of boxes. I am very close to buying it but not quite yet.

Michael says he’s spooked by the valuations of TPW.

“It’s about 50 times 2022’s earnings. That’s not even next years’ earnings, that’s the year after. There is no doubt it’s expensive. It’s definitely ridden on the coattails of COVID in a positive way. The management has come out and sold a big chunk of shares. This always spooks the market.

“Its highly unlikely if they can maintain the same rates of growth going forward. It’s difficult to buy now.”

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