Down 87%, should I snap up this UK fashion stock for only 53p?

In the past three years, no company has been registered in the Aim 100 has lost more value than fast fashion brands boohoo (LSE: BOO). The share price is down 87%, the company has lost more than £4bn in value, and now I can get a share for just 53p. Is the price too low for this UK stock?

No company can grow forever

boohoo is a growth stock, so I’m looking for the value of my investment through rising share prices rather than receiving dividend payments. This strategy can give me market beating returns if I hold the stock in the future Amazon, Teslaor AstraZeneca. But there are other uncertainties with such stocks as well.

A quick look at the revenue for the Manchester-based fashion retailer says. Sales are up, but growth is slowing. And while the results for 2023 are not yet out, the four months to December 31 show a decline in sales across all regions by an average of 11%.

But it gets worse. boohoo is not profitable in 2022 and has a negative price-to-earnings ratio. While unusual in growth stocks, when combined with declining profits it points to an uncertain future and goes some way to explaining cratering stock prices. But it’s not all bad news.

Industry $1.7trn

The rampant inflation has made it a tough time for companies, especially retailers that sell non-essential products like clothing. So the poor results above can only be temporary blips. If that happens, then buying at 53p could be profitable going forward.

The online fashion industry is worth $1.7trn. This is a huge figure compared to boohoo’s £670m market cap and shows that there is still room for growth, particularly in emerging markets.

And I’m sure there will be a huge demand for cheap but fashionable clothes. Primark’s success is proof.

In fact, if the company had only returned to its 2020 share price of 413p, I would have made a 769% profit on the shares I bought today. That high was reached during the first Covid lockdown, however, when investors may have been more confident about the long-term viability of online retailers.

I bought it?

All in all, I think the current inflation and cost of living issues are driving the decline in stock prices. And that might mean now is a good time to buy.

The online retail industry is still young, and I think there are going to be some big winners. Is boohoo one of them? Perhaps. I’ll put it on my watch list now.