is next plc shares on offer at 50% off?

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Stock Chart showing 50% drop

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STRENGTH

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NEXT PLC STRONG OPERATING MARGINS

is 20%, > than

4%.

7%.

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But BOOHOO and ASOS is growing sales faster than NEXT!

But PEG RATIO of NEXT’s 0.61, compared with

BOOHOO’s 0.93 and

ASOS’s 5.03.

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NEXT PLC’s Operating Margins never went below 10% for the whole of the 21st Century!

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EARNING POWER OF NEXT PLCNext has consistently produce increasing levels of earnings through the years.

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Although, debt rose to £900m

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Should NEXT PLC be worried? A LITTLE

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In 2016, NEXT PLC’s Free Cash Flow £469m

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Free Cash flow covers debt in two years! IF, they continue to produce the goods.

AND, if NEXT’s management decides to stop returning cash to shareholders for two years.

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In fact, NEXT is a money churner, here’s what I mean?

+

=

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Returned on Invested Capital is important, meaning

When NEXT invest £1,000 or $1,000 (if you are American) of EXTRA CAPITAL into the business, it earns between £300 and £500 (every year).

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Similar to having Savings Account with 30%-50%

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Secret to NEXT PLC’s earnings power

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First, a breakdown of total revenue between online and retail

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Second, a breakdown total earnings between online and retail

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What is behind NEXT’s online success?

CREDIT SERVICES!!!

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In 2016, the retailer earns £180m in interest charges (or 30% of total profits).

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What was NEXT able to make this amount?

1. They have 4m active online customers. 2. Online sales accounts for 45% of total sales. 3. NEXT charges 25% APR interest on its store cards.

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So, is an illegal way of making money? NO, because others do it.

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WEAKNESSES, (Or, perception of weakness)

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NEXT’s LIKE-4-LIKE SALES are terrible

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This is down to Buying too much real estate

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Net Cash Earnings covers less trade receivables

A possible signal of the share price weakness?

(See next slide)

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Debt to Equity at 300%.

Not a problem when NEXT PLC is making £450m+ in free cash

flow a year.

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What IF, NEXT no longer earns any free cash flow

Then the debt issue will resurface!

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MARKET METRICS & VALUATIONS

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A TABLE SHOWING NEXT MARKET METRICS:

Metrics are below average historical levels, but not at all-time lows.

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The problem is the future direction of where “E” is moving

Will the future of NEXT’s earnings crash?

We will wait and see!

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Remember, NEXT PLC had a similar crash in the past!

In 2008/09, NEXT’s share price fell by 70% because earnings declined by 18%!

(See next slide)

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SHARE PRICE FORECAST

Disclosure: Don’t take this as investment advice!!!

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SHORT-TERM

There could be a buying opportunity for NEXT, at £33-£35/share.

Target upside of £45-£47/share.

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MEDIUM-TERM (18 months horizon)

Much harder to predict as the following factors affect NEXT PLC’s Earnings:

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1. Inflation spike from the Weak British Pound

Input costs affect margins.

Clothing is not a necessary purchase, if food and energy prices spike as well!

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2. Bank of England raising interest rate

Although it is a low probability this could happen if inflation persists. Rising interest rates will caused mortgage costs to go up. Therefore, budgets for clothing could be cut!

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3. Will higher inflation leads to higher wages?

This can be offset if employees get a wage increase ≥ INFLATION!

It helps to stabilise the retail sector from rising costs.

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With these future cost inputs pressure, the next 18 months could see the trades around:

£30/SHARE.

if NEXT manages to sustain net income of £550m or more.

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CALL TO ACTION Tell me what you think about NEXT PLC as a business and where its going forward.

1. Will it have the same staying power than other retailers?

2. Is their fashion still relevant? 3. Will people continue to shop

elsewhere?

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Finally, my original article for this slide presentation (with in-depth explanation) is found by clicking the link below: “Is NEXT’s Share Price Offering at “50% OFF” Presents Value Buying Opportunity?”

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