In This Article:
Globe International Limited (ASX:GLB), a AU$46.44M small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 12.67% in the upcoming year . Below, I will examine the sector growth prospects, and also determine whether Globe International is a laggard or leader relative to its consumer discretionary sector peers. Check out our latest analysis for Globe International
What’s the catalyst for Globe International’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer discretionary goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. In the past year, the industry delivered negative growth of -3.37%, underperforming the Australian market growth of 6.91%. Globe International leads the pack with its impressive earnings growth of 7.19% over the past year. This proven growth may make Globe International a more expensive stock relative to its peers.
Is Globe International and the sector relatively cheap?
The luxury goods sector’s PE is currently hovering around 9.14x, below the broader Australian stock market PE of 17.15x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 9.73% on equities compared to the market’s 11.35%. On the stock-level, Globe International is trading at a PE ratio of 9.14x, which is relatively in-line with the average luxury goods stock. In terms of returns, Globe International generated 14.42% in the past year, which is 4.69% over the luxury goods sector.
Next Steps:
Globe International recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If the stock has been on your watchlist for a while, now may be the time to buy. If you like its proven ability to generate growth, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best opportunity. However, before you make a decision on the stock, I suggest you look at Globe International’s fundamentals in order to build a holistic investment thesis.