Don’t overlook this promising ASX retail stock

Investors should look beyond the usual suspects to this high-growth retail stock.

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Woolworths (ASX: WOW) dominates the headlines, alongside competitor Wesfarmers (ASX: WES), operator of Coles, Kmart and Target. Department stores David Jones (ASX: DJS) and Myer (ASX: MYR) represent other well known retail names and stocks.

However, for growth-minded investors, it’s important to note that all these companies have fairly mature retail concepts and store bases. None will be expanding dramatically from here.

That’s not the case with The Reject Shop (ASX: TRS), an Australian discount retailer at a far earlier stage in its growth cycle. This chain of discount stores saw sales grow by nearly 12% in the first half of the year and opened 17 new stores during the same period.

With the company still only a little more than halfway to its planned total number of stores, TRS shares look relatively inexpensively priced, trading for less than 1 times sales, about 17 times earnings, and on an EV to EBITDA basis of about 10.

The Reject Shop’s position as a discount retailer also means the stores are less likely to be affected by wavering consumer confidence levels – making the shares an excellent counter-cyclical play in the event of a recession.

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Motley Fool writer/analyst Catherine Baab-Muguira owns no shares in any company mentioned in this article.

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