Stock Review – Harvey Norman Holdings (ASX:HVN)
We’ve recently signed up to Simply Wall St and have been utilising its software to review potential stock purchases. I’m really enjoying the interface and graphical representation of the data. We’ll be moving on to the free plan at first and then onto the paid subscription if the free plan is not enough for us. Below is my review of Harvey Norman (ASX:HVN) and its competitors:
Harvey Norman Holdings (ASX:HVN) – $5.14
Harvey Norman Holdings Limited grants franchises to independent business operators as business owners, who retail products for home and office use. Its franchisees sell products in various categories, including electrical, computers and communications, small appliances, furniture, bedding and manchester, home improvements, lighting, and carpet and flooring. The company has 192 franchised complexes under the Harvey Norman, Domayne, and Joyce Mayne brands in Australia; and 85 company-operated stores under the Harvey Norman brand in New Zealand, Ireland, Northern Ireland, Singapore, Malaysia, Slovenia, and Croatia. It is also involved in the property investment and media placement activities, as well as provides consumer finance and other commercial advances. The company was founded in 1982 and is based in Homebush West, Australia with around 5,100 employees.
Based on a Discounted Cash Flow Model, the stock is currently priced about right with a future cash flow value of $4.74
With a current yield of 6.72% and a long history of paying dividends, HVN is doing pretty well in this regard. However, the dividends per share have been on a rollercoaster for the past 10 years with no consistency and with a payout ratio of 77%, it’s on the high side for our liking.
Analysts are definitely not bullish on this stock with a wide spread from buy to sell. This doesn’t paint a favourable picture overall for HVN.
With an aging business model of bricks and mortar store fronts, we don’t believe that Harvey Norman has solid long-term prospects. Although, they have seemingly done well in recent times having outlasted Dick Smith in their stunning collapse in 2016. With pressure from more streamlined businesses like JB Hi-Fi and Kogan.com squeezing HVN’s profits and the upcoming entrance of Amazon.com into the Australian market, HVN will likely struggle to compete.
Another marker that we like to base our stock purchasing decisions on is whether we would or do use their services or products. The short answer is no. HVN more often than not sell over-priced goods that do not appeal to anyone except the older or more well-off demographics. With the rise of online shopping, it seems that HVN’s days are numbered as a retail business unless they can shift their business model to the modern age.
In summary, if you’re looking at adding a retail company to your portfolio then you won’t be doing too bad with HVN if you think its future prospects are bright, however, a business like JBH is a better option.