Here's why Retail Food Group Limited shares are a BARGAIN

Retail Food Group Limited (ASX:RFG) shares are cheap, have a huge dividend yield and the company is growing rapidly.

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Retail Food Group Limited (ASX: RFG) is cheap, has a huge dividend yield and is growing rapidly.

Indeed, the owner of Donut King, Gloria Jeans, Pizza Capers and much more, today announced yet another upgrade to profit guidance.

In an announcement to the ASX, Retail Food's CEO, Tony Alford, said, "Notwithstanding the successful execution of an ambitious development program throughout the entirety of FY15, there remains a vast array of opportunity within reach for the Company."

While the market appears unenthused by Retail Food's blockbuster track record in the face of a slowing economy, Mr Alford remains bullish – and is on the prowl for new opportunities.

"It is not RFG's intention to remain idle in the face of such opportunity, and as such, the Company is in pursuit of additional revenue drivers able to deliver enhanced and sustainable shareholder outcomes which underpin long term growth," Mr Alford said.

At its Annual General Meeting today, the company reinforced its expansion into the giant global coffee market, announced a push into the coffee capsule market and upped the group's 2016 financial year profit guidance.

Despite reaffirming its profit growth target of 20% over FY16, Retail Food today said it expects first-half underlying profit growth of 25%, but on a 'like for like' basis profit growth is expected to be 35%.

Buy, Hold or Sell?

Retail Food Group's share price has now fallen 38% in six months. However, at today's share price it trades on a forecast price-earnings ratio of just 10x and a dividend yield of 6.22% fully franked. That's 8.88% grossed-up for those tax-effective franking credits!

While the short-term economic outlook is a little cloudy, Retail Food's quality brands, cheap shares, growing international business and huge dividend yield make it a bargain in my book.

Motley Fool contributor Owen Raskiewicz owns shares of Retail Food Group Limited. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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