Business & Investment

Which is the better purchase?

NS ASOS (LSE: ASC) When Boohoo (LSE: BOO) Both stock prices were darlings on the stock market.

Unfortunately, this year the company has lost grace. So far, Boohoo’s share has fallen 46%, while ASOS has fallen 51%.

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Following this performance, I am attracted to both companies. These are some of the UK’s most efficient and fast-growing retailers. They have revolutionized the world of online fashion and have led the e-commerce revolution throughout the industry.

However, if you only need to buy one of these stocks, you will find that one is much more powerful than the other.

ASOS Stock Price Headwind

ASOS was a British pioneer in the field of digital fashion. Investors were able to buy shares in the company for about 20 pence shortly after the crash of dotcom when internet retail was still in its infancy.

Since then, the organization has expanded around the world and redefined the e-commerce fashion market. However, this group has never really been able to take full advantage of the starting lineup.

Profit and earnings growth is slow compared to rival Boohoo, which trades in the fast fashion market. And this doesn’t seem to change, following the company’s recent profit warning.

ASOS revenue has grown 140% over the last five years, while Boohoo revenue has skyrocketed 520%. Indeed, the latter is in the early stages of growth. Its revenue is still half the size of its larger peers.

Boohoo stock price rise

By investing heavily in marketing collaboration, Boohoo was able to succeed even if ASOS failed (Boohoo just announced the biggest fashion collaboration ever with mega celebrity Megan Fox). This helped the company leverage its social media platform. And this growth, in turn, will provide additional capital for the acquisition.

That said, Boohoo’s share price has recently been under pressure following accusations of poor working conditions at its factory in the United Kingdom. These accusations cast a cloud on the group, Depressed its reputation..

By comparison, ASOS does not have such a reputation problem, but always suffers from a very thin rate of return. These thin margins mean that the group has little room for error. Even a slight decrease in revenue or an increase in spending can have a significant impact on revenue.

In fiscal year 2020, ASOS had a net profit margin of 3.4%, while Boohoo had a net profit margin of 5.2%.

Which is the better purchase?

Therefore, ASOS and Boohoo stocks have their strengths and weaknesses, respectively.

However, ethical considerations aside, buy Boohoo for your portfolio. The company has a track record of growth, and as mentioned above, There is still plenty of room for growth.. Its generous rate of return also provides additional capital for the group to pursue growth.

Nevertheless, we recognize that due to the above ethical considerations, this group may not be suitable for all investors.

Rupert Hargreaves does not have a position in any of the listed shares. The Motley Fool UK recommends ASOS and the boohoo group. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by exploring different insights, Better investors than us.

Which is the better purchase? Which is the better purchase?

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