JBH share price in focus
Founded in 1974, JB Hi-Fi is among Australia’s leading retailers of electronics and home entertainment products.
The company operates across three main segments: JB Hi-Fi Australia, JB Hi-Fi New Zealand, and The Good Guys, the latter acquired in 2016 and offering a similar product range.
JB Hi-Fi follows a cost-leadership strategy, focusing on competitive pricing to stand out against its rivals. Frequent discounts on its products enhance their perceived value, providing customers with attractive deals.
The key metrics
For investors, JBH’s revenue, gross margin, and profit can provide valuable insights into the company’s performance.
JBH last reported an annual revenue of $9,592m with a compound annual growth rate (CAGR) over the last 3 years of 2.5% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. JBH’s latest reported gross margin stood at 22.3%.
Finally, the number we’re most interested in – profit. Last financial year JB Hi-Fi Ltd reported a profit of $439m. Three years ago they made a profit of $506m, representing a CAGR of -4.6%.
Financial health of JBH shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
JB Hi-Fi Ltd’s net debt currently sits at $340m. Higher debt levels can increase sensitivity to interest rate changes and economic cycles.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. JBH has more equity than debt, with a debt/equity ratio of 42.2%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. JBH generated an ROE of 29.5% in FY24.
What to make of JBH shares?
While the JBH ROE is reasonably good, the revenue and profit trends have been uninspiring. It would be worth digging into the annual reports a bit deeper to understand why that’s the case and if there’s a plan in place to address it.
Please keep in mind this should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.
