19/02/2026

It’s only been three months since my last valuation update (sounds like a confession! :D) On the surface the Lovisa result looked really good, and @mikebrisy@rh8178 @Solvetheriddle have eluded to this. I’m not unhappy with the result, after all it’s a record half NPAT.

However, as good as it is I don’t think Lovisa can achieve my expected FY26 statutory NPAT of $105 million, which is the basis for my previous valuation of $35 per share. I know there is a lot to dig deeper into, including the abnormals etc, but for my valuation I’m focusing on statutory NPAT. Brett Blundy would say, keep it simple and talk to me about the indicators I can understand, NPAT and ROE. His clear understanding of the importance of high ROE has clearly paid off as a retailer.

I’m going to make a few assumptions here, so I’m happy for others to pick holes in them.

Lovisa’s FY2025 Stat NPAT was $86.3 million with $57 million in 1H25 and $29 million in 2H25. Assuming 2H26 continues to track 21.5% ahead of 2H25, then FY26 NPAT should come in at $93.4 million (up 8% on FY25, but down 11% on what I was expecting for FY26).

So in light of this I’m going to pull back my valuation. I am now expecting statutory EPS of 85 cps (up 8% on FY25). Working on a PE of 30 (the lower end over the last 5 years), I get a valuation of $25.20. Using a PE of 40 (mid-range) I get a valuation of $33.60.

Using McNiven’s Valuation formula assuming equity of $0.71 (could be slightly higher now) ROE of 118% (based on EPS of $0.84), 15% of earnings reinvested and requiring an annual return (ROI) of 9%, I get a valuation of $26.40.

Im going to go midrange with my valuation, so $29 per share. For me I will consider adding below $25 per share, and reducing above $35 per share. At the current price of $27, I think it’s a HOLD.

Held IRL (0.8%)

21/11/2025

It is almost 12 months since my last valuation for Lovisa. My last valuation was $25. That was a bit light on!

To buy Lovisa at yesterday’s close of $34.82 you are paying 44 times FY25 earnings and 35 times consensus FY26 earnings! That’s within the PE range Lovisa has been trading at. That sounds expensive for a retailer, however show me another retailer that has demonstrated 30% earnings growth, and over 110% ROE! Going on consensus ROE could be 125% for FY26.

What does that make Lovisa worth today! I think it’s fair value at $35. It might shoot up from here if the market likes the trading update. However using McNiven’s Formula I get an annual shareholder return of 8% at a cost price of $35 based on the forecast input metrics (using 125% ROE). Most quality growth stocks come in under 10% annual shareholder return using this formula, so you do have to pay up for a capital light growth retailer like Lovisa. I’d prefer to be buying Lovisa at $30 per share just to allow for a bad year, which could easily happen.

16/11/2024

It looks like it’s been over 12 months since my last valuation (I didn’t date it). There’s been a 59% jump in the share price in the last year and I suspect the valuation has jumped also.

Let’s take a look!

@Slew has done some work on store roll outs so far this year (36) which seems to be not as good compared to last year at this stage (99 total rollout last year).

What do the analysts think will happen with earnings? There quite a few that follow Lovisa (a consensus of 14 on Simply Wall Street for forecast earnings data)

Source: Simply Wall Street

For FY25 the consensus NPAT is 95 cps and heading up steadily over the next few years. If this turns out to be close that’s a massive 125% ROE based on shareholder equity of 73 cps at the end of FY24. That’s the highest forecast ROE of all the businesses I hold IRL.

If I use McNiven’s Formula and assume ROE can be maintained at 125% (unlikely I believe), shareholder equity of 73 cps, 15% of earnings reinvested, 85% earnings paid as unfranked dividends (approx 2.8%), I get a valuation of $25 for a 10% required annual return. So even though the share price is well down from its 12 month high of $37.48, it doesn’t look cheap to me.

Source: Simply Wall Street

The other thing to note is that over the last 4 years Lovisa has paid out more in dividends than it had in NPAT! The dividends are well covered by cash flow, but over the same time debt has risen and cash reserves have fallen. Four years ago Lovisa had no debt and $38 million in cash. Now it has $54 million in debt and $35 million in cash. Still very conservative, however, I’m not sure if Lovisa can continue to pay out more dividends than NPAT continually. It’s not something you see a lot. Perhaps Brett Blundy can see the business spewing more cash into the future? He generally sees high ROE as KING, and debt as the enemy!

Source: Simply Wall Street

Looking at my current valuation I probably should have been selling Lovisa last month. For me it’s a hold for now. I don’t think it’s cheap enough at $29 per share.

Held IRL (0.8%)

11/2023?

FY23 NPAT $68.2M up 20.1% on last year, but was 7.5% below analysts consensus of $73.7M.

FY23 EPS 63.3cps up 16.6% on last year.

Final Dividend 16% lower at 31cps compared to 37 cps last year. Total FY23 dividends of 69cps representing a 109% payout ratio. This is a worrying trend. For high ROE businesses I would prefer to see more earnings reinvested into growth.

Franking reduced to 70% compared to 100% previously. With a higher proportion of overseas earnings this might be the norm from here on.

Total shareholder equity of $80M, with 110M shares outstanding at 30 June 2023. Equity per share of 72.7cps.

Return on Equity (ROE) at 85.3%. While this is likely the best in the ASX retail sector, it’s not as high as I was expecting (+90%).

Using McNiven’s StockVal formula assuming forward ROE of 85%, equity of 73cps, 10% of earnings reinvested, and a required annual return of 10%, I get a valuation of