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Retailers are all the rage this week, and teenage fashion retailer Boohoo.com is no different. Investors only have to look at ASOS, a company derided for years for its apparently transient business model, which has still managed to post an incredible return. In the process, ASOS has become a titan of the small cap market, with a valuation now on its way to hitting £6 billion.
Can Boohoo.com do the same? It is possible, as are many things in the stock market. The timing is propitious; the UK economy is enjoying improved growth and consumers are feeling better about spending money. However, the 16-24 age market is notoriously fickle, and the company is not without its competitors. A quick look at the prospectus suggests that the company faces significant hurdles if it is looking to boost its popularity and sales.
Analysts around the city have run the numbers, and with a market cap of around £850 million being suggested as a rough figure (once the post-IPO rise is taken into account) the company is valued at around 100 times earnings. To say this is a bit rich doesn’t quite convey the real situation.
That said, ASOS is on an earnings multiple of 126, but continues to rise (meanwhile, Next, one of the stars of the High Street, is on a lowly multiple of 19.5). It would be unwise to say that Boohoo.com will see similar stellar growth, but the outlook for retailers is looking much better at present, and a rising tide lifts all boats.