Sports Direct International a ‘buy’ following strong profit growth

10th March 2014

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Following a considerable 12-month surge in its share price and an upbeat set of results brokers are tipping discount-clothing retailer Sports Direct International as a stock to snap up writes Philip Scott.

Owner of the landmark Lillywhites store at Piccadilly Circus in central London, the FTSE 100 listed firm has witnessed its shares rocket by 93% over the past 12 months on the back of impressive sales and profit growth.

Despite tougher trading conditions in the run up to Christmas, Sports Direct’s third quarter results were encouraging, where the business reported that its gross profit was up some 15% to £281m, year-on-year in the 13 weeks to January 26.

The market consensus is a ‘buy’ with a flurry of analysts upbeat on its prospects and brokers at retail stockbroker The Share Centre have just added it to their own ‘buy’ list.

Sheridan Admans, investment research manager at The Share Centre says: “The forward p/e ratio is currently 26 times earnings, which is toppy for a retailer. However, given its rate of expansion and future plans for driving earnings growth, by expanding overseas into higher margin premium segments, its target of 10-15% per annum gross earnings growth looks achievable.

“We have upgraded our recommendation for Sports Direct to a ‘buy’ as we become more confident in the improving economic outlook, both in the UK and Europe, aiding the company’s strategy to expand. Momentum and expansion should support the share price and we recommend investors drip feed into the stock on dips.”

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