The share price of Super Retail Group Ltd (ASX: SUL) has gained 30% in the past 12 months which means it has massively outperformed the negative 2% return of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
With the share price currently at $9.65 could the stock still be a buy?
Here are three reasons to remain positive on the stock:
Track record – the company has successfully (over the past six years) grown sales from less than $1 billion to over $2.2 billion with earnings before interest and tax (EBIT) rising from $66 million to $170 million and annual dividends per share doubling.
While the market (and management) viewed the 2015 full year results as somewhat lacklustre, with earnings per share falling from 55.1 cents per share (cps) to 49.4 cps, management has undertaken significant restructuring activities to address performance issues in some of the group's business segments.
Growth initiatives – At the retailer's recent Annual General Meeting (AGM), management outlined the significant investment undertaken to develop and support its businesses. In 2015, spending incurred included $39 million on new and refurbished stores and $33 million on developing and improving sales strategies, supply chain and inventory initiatives. Management also provided guidance that it expects to open a total of 30 new stores this financial year.
Positive outlook – A trading update incorporating the first 16 weeks of the current financial year has reported positive like-for-like sales growth across Super Retail Group's three divisions of Auto Retailing, Leisure Retailing and Sports Retailing.
Importantly, EBIT margins within the Auto and Sports divisions were also higher than the prior corresponding period – a factor not lost on shareholders in Dick Smith Holdings Ltd (ASX: DSH) who have seen their shares hammered recently.
Another reason to remain positive on Super Retail's outlook is that the group is less exposed to the apparel sector which continues to face high levels of overseas competition and is also less exposed to the housing cycle, which may have recently benefitted Harvey Norman Holdings Limited (ASX: HVN). Although, this could also become a drag as it is beginning to look like the property cycle may have peaked.
