Dec 02

IBall on ASOS-A Dot-com That Works ASOS PLC is a UK based online clothing store; they’re the largest purely on-line clothing store in the UK. A quick view of their web site finds a very user-friendly and eye-catching layout designed to attract the teenage and young adult target market; the company name is an acronym of As Seen on Screen, as much of their fashion is modeled on what UK celebrities are currently wearing. They service both the UK and the US, noting a flat $6 shipping rate to the US in a banner ad on the site and guaranteed shipment for Christmas if orders come in by December 7th.

However, it is better to be good than to look good, and the financials, if I can borrow from Fernando, look mavelous.

They nearly doubled their net income in FY 2009; going from 37 million pounds to 72 million pounds. They have no long term debt and a very healthy market to book ratio of 12.5.

The Price-to-earnings ratio of 34.5 is a bit high, but in a shopping universe that is increasingly going on-line, ASOS has a very good chance of doubling that net income again before leveling out into a mature company. If a normal market PE is in the high teens, ASOS will need to double its earnings per share before hitting maturity to be a good long-term buy, and the growth ASOS is showing should make it a good buy.

It would fit into the growth-stock bucket, but ASOS would be a good ad to the portfolio of either a UK or US investors; ASOS shares are traded over the counter in the US.

As an aside, and as an etailer myself, I find it remarkable that a website can be worth so much. The value is only in the customers, how many come back, how many new ones are coming in etc.  There will be little stock, or Real Estate.

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