A look at the investment opportunity presented by NEXT PLC (since the stock fell by 50%). Details include the retailer’s earnings power, liquidity issue, comparison with BOOHOO and ASOS, market valuation and share price forecast (Short- AND Medium-term). Disclosure: The slides are not investment advice, but for presentation and entertainment purposes. PLEASE “DO YOUR OWN RESEARCH” and seek professional help!!!

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2. Stock Chart showing 50% drop
20/02/2017 2

3. STRENGTH
20/02/2017 3

4. NEXT PLC STRONG OPERATING
MARGINS
is 20%,> than
4%.
7%.
420/02/2017

5. But BOOHOO and ASOS is
growing sales faster than NEXT!
ButPEG RATIO ofNEXT’s 0.61, compared with
BOOHOO’s 0.93 and
ASOS’s5.03.
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6. NEXTPLC’sOperatingMargins never
wentbelow 10%forthe whole ofthe 21st
Century!
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7. EARNING POWER OF
NEXT PLC
Next hasconsistentlyproduceincreasinglevelsof earningsthroughtheyears.
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8. Although, debt rose to £900m
820/02/2017

9. Should NEXT PLC be
worried?
A LITTLE
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10. In 2016, NEXT PLC’s Free Cash
Flow £469m
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11. Free Cash flow covers debt in two
years!
IF, they continue toproduce the goods.
AND, if NEXT’s management decides tostop returning cash to
shareholders fortwo years.
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12. In fact, NEXT is a money churner,
here’s what I mean?
+
=
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14. Returned on Invested Capital is
important, meaning
When NEXT invest £1,000 or$1,000 (if you areAmerican)
ofEXTRA CAPITAL intothe business, it earns between £300
and£500 (every year).
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15. Similar to havingSavings Accountwith 30%-
50%
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16. Secret to NEXT
PLC’s earnings
power
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17. First, a breakdown of total revenue
between online and retail
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18. Second, a breakdown total earnings
between online and retail
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19. What is behind NEXT’s online
success?
CREDITSERVICES!!!
1920/02/2017

20. In2016,the retailer earns £180min interest
charges(or 30% of total profits).
2020/02/2017

21. What was NEXT able to make
this amount?
1. Theyhave4m active onlinecustomers.
2. Onlinesalesaccountsfor45%of totalsales.
3. NEXT charges25% APRinterestonits storecards.
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22. So, is an illegal way of making
money? NO,becauseothersdoit.
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23. WEAKNESSES, (Or,
perception of
weakness)
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24. NEXT’s LIKE-4-LIKE SALES are
terrible
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25. This is down to Buying too much
real estate
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26. Net Cash Earnings covers less
trade receivables
A possiblesignalof the sharepriceweakness?
(Seenext slide)
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28. Debt to Equity at 300%.
Not a problem when NEXT PLCis making £450m+ in
free cash flow a year.
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29. What IF,
NEXT no longer earns anyfreecash
flow
Thenthe debt issue will resurface!
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30. MARKET
METRICS &
VALUATIONS
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31. A TABLE SHOWING NEXT MARKET METRICS:
Metricsare belowaveragehistoricallevels,butnotatall-time
lows.
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32. The problem is the future direction of
where “E” is moving
Will the futureof NEXT’s earnings
crash?
We will wait and see!
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33. Remember, NEXTPLC hada similar crashin the
past!
In 2008/09, NEXT’s shareprice fell by 70% because earnings
declined by 18%!
(See next slide)
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35. SHARE PRICE
FORECAST
Disclosure: Don’t take this as
investment advice!!!
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36. SHORT-TERM
There couldbeabuying opportunity for
NEXT, at £33-£35/share.
Targetupside of £45-£47/share.
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37. MEDIUM-TERM (18 months
horizon)
Much harder topredict as the following factors
affect NEXT PLC’sEarnings:
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38. 1. Inflation spike from the Weak
British Pound
Input costs affect margins.
Clothing is not a necessary purchase, if foodand
energy prices spike as well!
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39. 2. Bank of England raising interest
rate
Although it is a low probability this couldhappen if
inflation persists.
Rising interest rates will caused mortgagecosts togo
up.
Therefore, budgets for clothing could
be cut!
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40. 3. Will higher inflation leads to higher
wages?
This can be offset if employees get awage increase ≥
INFLATION!
It helps tostabilise the retail sector from rising
costs.
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41. With these future cost inputs pressure, the next 18
months could see the trades around:
£30/SHARE.
if NEXT manages tosustain net income of £550m or
more.
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42. CALL TO ACTION
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Tell me what you think about NEXT PLCas a business
andwhere its going forward.
1. Willithavethesamestayingpowerthanother
retailers?
2. Istheirfashionstillrelevant?
3. Willpeople continuetoshopelsewhere?

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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’sSharePriceOfferingat“50% OFF”Presents
Value Buying Opportunity?”

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