Should I buy Made.com shares after the IPO?
On 16 June, furniture and homewares group Made.com (LSE: MADE) listed on the London Stock Exchange via an Initial Public Offering (IPO). Like a few other recent UK IPOs, it wasnt a huge success. The stock closed down 7% on the first day of trading (although its since recovered). Here, Im going to look at the investment case for Made.com shares. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air And if you click here well show you something that could be key to unlocking 5Gs full potential...  Made.com: the business  Made.com retails curated furniture and homewares to customers in the UK, Germany, Switzerland, Austria, France, Belgium, Spain and the Netherlands through a localised e-commerce platform. Since its launch in 2010, Made.com has grown significantly and along the way has developed a large, active and loyal customer base. Last year, it had around 1.1 million active customers (unique customers who shopped at least once during the year). The brand is particularly popular with Millennials. Made.com operates a vertically-integrated business model that covers the entire product lifecycle from product development and sourcing through to global shipping, warehousing, and home delivery. To create its product range, it partners with over 150 established and up-and-coming designers, artists, and collaborators. The IPO price was 200p per share, valuing the company at around 1.2bn. Made.com shares: the bull case  From an investment point of view, there are a number of things I like about Made.com. Firstly, I think the company has a great offer. In the last few years, Ive purchased a number of its products, including a leather sofa, an armchair, and a sideboard and, overall, Ive been very happy with the products. Made.com seems to offer high-quality products at good price points. Its worth noting that Made.com has over 11,000 reviews on Trustpilot and overall has a great rating with a score of 4.2 out of five. By contrast, IKEA has a score of 1.5. So, clearly, Made.com is doing something right. It also has more than 3m followers across its social media accounts. Secondly, the companys growth in recent years has been impressive. Mades IPO prospectus reveals that last year it generated revenue of 247.3m, up from 211.8m in 2019 and 173.4m in 2018. So annualised growth over this period was 19.4%. Thats pretty good, given UK economic conditions last year. Source: Made.com  Risks  However, I do have some concerns about Made.com shares. One is that the company still isnt profitable. Last year, its net loss was 7.6m. This adds risk to the investment case. Weve seen recently that the share prices of companies with no profits can fall sharply in a market sell-off. Another issue is the competition the company faces. Not only does it face competition from established rivals such as Ikea, DFS, and John Lewis, but it also faces competition from newer companies such as Loaf. In this industry, barriers to entry are minimal. Finally, theres the valuation. At Made.coms current valuation, it has a trailing price-to-sales (P/S) ratio of about 4.85. I see that as quite high. By contrast, online retailer ASOS has a P/S ratio of 1.5. Made.com shares: my move  Looking at the risks to the investment case, Im going to keep Made.com shares on my watchlist for now. All things considered, I think there are better stocks I could buy at present.