The RCG Corporation Ltd (ASX: RCG) share price has dropped nearly 10% in the space of a month to $1.55, so is this an opportunity for smart investors?

RCG Corp is the owner of Athlete’s Foot – the shoe store, as well as 75 Platypus shoe stores. The company also owns several brands as well as exclusive licences to several more. As an example, RCG operates more than 45 Skechers stores across Australia and New Zealand, as well as 60 Hype DC stores across Australia.

Other Brands include Vans, Sperry, Timberland, Merrel, Saucony and CAT. All up, RCG operates more than 380 stores across Australasia through 9 different retail chains and has the exclusive distribution rights to 11 international brands here in Australia as well as New Zealand.

Earnings have been growing nicely over the past few years, and the company has delivered a compound annual growth rate of 34% to shareholders over the past eight years.

In the 2016 financial year (FY16), RCG saw an underlying net profit of $33 million – up 142% over the previous year and a 49% increase in earnings per share. Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 178% over the previous year to $60.4m, with much of the growth coming from the March 2015 acquisition of the Accent Group.

RCG also completed the acquisition of the Hype DC stores in August 2016, which will add immediate earnings growth in FY2017. RCG is forecasting FY2017 underlying, annualised EBITDA of $90 million – 50% higher than FY2016.

At the current share price, RCG is trading on a P/E ratio of ~25x earnings, but we need to keep in mind the big increase in earnings expected in 2017. The dividend yield is reasonable at 3.5%, fully franked too.

Comparing RCG to other retailers, Premier Investments Limited (ASX: PMV) is trading on a trailing P/E of 16.6x, Nick Scali Limited (ASX: NCK) is on a P/E of 17.6x and Beacon Lighting Group Ltd (ASX: BLX) is on a P/E of 21.3x.

That suggests that as a retailer, RCG Corp is expensive at these prices – although considering the expected increase in earnings – a P/E ratio of 25x is misleading, and the share price is cheaper than that. Foolish investors might want to add this company to their watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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.