The Boohoo share price could be the steal of the decade

As I wrote last month, I think Boohoo Group (LSE: BOO) could be one of the three best stocks to buy now. I highlighted that the shares had fallen 70% in the previous 12 months so were cheaper than they were five years ago. With the Boohoo share price continuing to fall since then, my belief that the shares could be the steal of the decade has solidified.

The pros and the cons

The cons of investing in Boohoo have been well covered in recent months — ESG concerns, high levels of customer returns, supply chain issues, cost of living crisis and slower US growth. In other words, a lot for management to deal with. However, there seems to be a bit of a case of kicking a man when he’s down and without meaning to mix my metaphors, commentators and analysts jumping on the bandwagon. The herd thinks Boohoo is becoming ex-growth, or that growth will slow significantly. But is that really the case?

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In 2019, earnings per share (EPS) grew by 53.3%, in 2020 by 26.7% and in 2021 by 44%. By my reckoning that’s very impressive for an AIM-listed share. ASOS’s EPS over the same timeframe was -69.8%, +322% and -2.9%. The latter has also lost its CEO and chairman in recent months. I like ASOS as it happens, but Boohoo seems to be the more stable and consistent fast fashion e-commerce retailer right now.

The expectation is for its EPS to fall to 86.4p in 2022 and then rise back up to 118.8p in 2023. There’s the potential that if Boohoo outperforms these lowly expectations, the shares could re-rate quickly and in turn, the price could rise.

Boohoo has always reinvested into generating future growth and has not paid dividends. From my perspective, it seems the chance that it stops growing is unlikely. That’s why there could be a lot of upside to the current share price because investors’ expectations are just so low.

Is the Boohoo share price really a steal?

However, in the short term it’s nearly impossible to say whether Boohoo will reverse the falls of the last 12 months, or continue to trade at new lows. It’s a binary bet.

Looking longer-term though, the odds of the shares going up are potentially, much better. I’d only invest in a share for its long-term potential. On balance Boohoo’s risk-to-reward ratio looks very favourable and given the ongoing growth of e-commerce, I do think the shares are a steal at the current price. I feel the market overall is way too pessimistic about what an entrepreneurial management can achieve. Boohoo has come a long way and I think has a lot more international growth to come, as well as a strong brand in the UK – as evidenced by millennials still buying its products and by its UK sales. 

With the Boohoo share price having fallen sharply, it remains likely I’ll start to buy the shares in the coming weeks.

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Andy Ross owns no share mentioned. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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