MENU

Here’s why Vita Group Limited shares have gone gangbusters today

Source: Telstra presentation

The shares of telecommunications and IT retailer Vita Group Limited (ASX: VTG) have surged higher by over 15% in early trade following the release of a stellar full year result.

For the year ended June 30 2016 the company delivered a massive 43% increase in net profit after tax to $38 million on a 19% increase in revenue to $645.1 million.

Brisbane-based Vita Group is a national provider of telecommunications, electronics, ICT products and services through retail and business channels. At the end of its financial year it was operating 137 outlets. This comprised 100 Telstra Corporation Ltd (ASX: TLS) retail stores, 21 Telstra Business Centres, 14 One Zero and 2 Fone Zone outlets.

The biggest contributors to the strong performance were its Telstra stores. Strong performances by both its Telstra retail stores and business centres helped take like-for-like store sales growth to 18% in the Retail segment and 8% in its Small to Medium Business (SMB) segment.

The great news here is that management is very confident that both its Retail and SMB segments will continue to drive earnings growth over the next couple of years. With the company’s SMB offering operating in a highly fragmented market, I would have to agree with management’s view that it is positioned perfectly for sustained revenue and profit growth.

Vita Group’s board declared a fully franked dividend of 14 cents per share for the year, which was a 75% increase on last year. At the current price this equates to a fully franked 2.8%. Whilst it isn’t the biggest yield you’ll find on the market, it is still a reasonable one and growing fast.

Earnings per share came in at 23.4 cents, up 34% on FY 2015. This means its shares are changing hands at around 21x full year earnings.

Whilst this might make them slightly more expensive than the likes of JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN), I believe they do have stronger growth prospects that justifies this. All in all I believe everything is pointing to Vita Group being a good long-term investment today.

But before you make an investment in Vita Group, I would highly recommend you take a look to see if you own either of these three wealth-destroying shares. Each could be harming your portfolio right now and might be best swapped out.

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.