You’d be forgiven for thinking that Adairs Ltd (ASX: ADH) shares were yo-yos because that’s how they behave in the market.
Even though Adairs shares fell by 10% today, they have been yo-yoing upwards.
ADH share price
Early payment for Mocka acquisition
As you can see above, the Adairs share price has gone up and down upon no material announcements.
The most recent announcement relates to an agreement to finalise and bring forward the settlement of the deferred consideration of the Mocka acquisition.
The CEO of Adairs, Mark Ronan said, “Mocka has performed ahead of the expectations we had of the business when we acquired it in December 2019.”
I’m scratching my head after reading this announcement. I would have thought Mocka’s excellent performance and early payment was a big positive!
How far can this yo-yo go?
Adairs was a big beneficiary of the pandemic with Aussies spending a lot of their discretionary income on homewares. The HY21 results illustrate this trend.
But again, the Adairs share price dropped after recording positive results.
It seems like a lot of investors remain unsure about the sustainability of the recent pandemic induced growth.
So, it’s important to understand what Adairs’ normalised earnings look like when carrying out a valuation.
In saying this, I think there is still a long runway of growth in respect to online sales, which made up 37% of total sales.
The big advantage here is that future online sales will generate higher margins for Adairs, ultimately contributing towards higher free cash flow.
If you’re on the hunt for ASX growth shares, I’d recommend signing up for a free Rask account to gain access to our stock reports.
