Are Kogan.com Ltd (ASX: KGN) shares too good to miss at the current share price after revealing big growth in August 2020?
Kogan.com is an e-commerce business which offers customers a wide array of products including electrical devices, as well as other services like Kogan Insurance and Kogan Mobile.
Kogan.com’s big August 2020
Kogan.com is currently announcing a monthly update about the progress of its business.
In August 2020 the company saw gross sales rise by more than 117% year on year, which helped gross profit go up by more than 165% year on year.
Adjusted EBITDA (click here to learn what EBITDA means) grew by more than 466% year on year.
Kogan.com said that it was the biggest month of monthly marketing investment in the history of the company. One of the initiatives that Kogan.com is doing is advertising during the primetime viewing TV show, The Block.
Active customers increased by 152,000 over the month to 2.46 million people. This represents the largest monthly increase in the history of the business.
Are Kogan.com shares worth buying?
This month follows on from a strong performance in July 2020.
July gross sales increased by more than 110% year on year. Gross profit rose by over 160%. Adjusted EBITDA was more than $10 million for the month.
It would be interesting to know how much of this strong sales growth was outside of Victoria. The locked down state only has e-commerce shopping available for customers, whereas if the rest of the country is also shopping a lot on Kogan.com then I think that signals an ongoing shift to online shopping that won’t unwind even once COVID-19 is no longer a problem.
Online shopping has its advantages for both the seller and the customer. Operating costs are lower and it’s much more scalable. For the customer, it probably saves time and there’s more choices to compare.
Kogan.com has pleasing network effects if it can convince customers to utilise its other services like insurance, telecommunications or superannuation.
I think Kogan.com has proved its doubters wrong. If you don’t think about the share sales by management, there’s not much you could criticise over the last few years – it has done the right moves to keep growing.
At the pre-open Kogan.com share price it’s valued at 44 times the estimated earnings for the 2021 financial year. That doesn’t seem bad considering how much growth it’s generating. If the large number of new customers turn into long term customers then Kogan.com could definitely be one to watch. But I’d only start with a small buy, just to see if this growth continues.
There are other ASX growth shares I’d buy first such as Pushpay Holdings Ltd (ASX: PPH).
