Kogan.com Ltd (ASX: KGN) has released a business update for Q1 FY20 showing some impressive growth. Is it time to buy Kogan shares?
About Kogan.com
Kogan.Com is an online business that was set up by Ruslan Kogan in 2006 in his parent’s garage. Kogan.Com offers a variety of products and services including Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel. Kogan.Com aims to offer consumers price leadership through digital efficiencies.
Q1 Results
Kogan reported that gross sales grew by more than 16% on Q1 FY19, with gross profit up by more than 28%. While operating costs increased, they were limited to less than 3% growth. The video below explains the difference between revenue and profit in more detail.
There were several factors driving growth during the quarter, one of which was strong growth in Exclusive Brands (over 35%).
Kogan also launched several new strands of the business, including Kogan Mobile NZ
, Kogan Money Credit Cards, Kogan Money Super, and Kogan Energy, all of which are beginning to contribute to growth.
Speaking about these new businesses, founder and CEO Ruslan Kogan said the value being created was clear.
“Kogan Mobile NZ is already shaking up the New Zealand prepaid market, Kogan Money Credit Cards is offering the best value consumer credit card in Australia,” he said.
“Kogan Money Super is offering ultra low fee index-based funds, and Kogan Energy has some of the lowest cost renewable energy deals in the market.”
Other figures worth mentioning were the 14% year-on-year growth in Active Customers, 347.5% growth in Kogan Internet Active Customers, and 20% growth in Kogan Insurance revenue.
On top of all this, one of the core businesses, Kogan Marketplace, continued to see strong growth with sales around double those of Q4 FY19.
Is It Time To Buy Kogan?
All of this growth is nice, and it’s clear that Kogan has found a business model that’s working for them. From an investor’s perspective though, it can be extremely hard to value a business that continues to add new, seemingly unrelated or non-core businesses.
For example, Kogan’s four new businesses span three very distinct industries, and it’s hard for me to say how they may perform or impact Kogan’s core business without a lot of in-depth research.
This approach to building the company also means that it could change very quickly and begin to look like a completely different business.
Kogan seems to be a good business and growth is certainly picking up, but, for me, I think there are other growth companies that are easier to understand like the ones in the free report below.
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Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.
