What a year it's been for shareholders of The Reject Shop Ltd (ASX: TRS)!
The group's share price is today 53% below the level it started 2014 at but 28% above the 2015 starting value after a roller-coaster 18 months featuring no less than 10 swings of more than 10% over a period of a few days.
August Relief
The Reject Shop's management team has to be commended for a solid set of full-year financials the company released in mid-August. My colleagues covered the highlights of the result at the time, but analysts were impressed by the return to same-store (or 'Like-For-Like') sales growth in the second half of 2015 and the return to positive free cash flow. The company ended June 2015 with a net cash position of $5.3m (up from net debt of $17.4m a year earlier).
Unsurprisingly, the share price rocketed around 10% higher on the day and just kept going, closing the month at $8.50 before pulling back to $8.20 so far in September.
Is there any value?
I mentioned in another article that electronics retailer Dick Smith Holdings Ltd (ASX: DSH) is trading on forward price to earnings ratio of just 6.95 and forward dividend yield of 10%. The Reject Shop hasn't provided guidance for the coming 12 months, but currently trades on a trailing price to earnings ratio of nearly 19 and dividend yield of 3.7%.
Both companies are facing headwinds from poor consumer sentiment, high fixed costs and sluggish retail sales growth, however it would appear that there is far more downside to buying the Reject Shop at current levels.
