Shareholders may have been a little surprised by Retail Food Group Limited's (ASX: RFG) performance over the last 12 months.
The stock shot up out of nowhere with an incredible list of acquisitions to become one of 2014's most impressive success stories – a situation that looks likely to continue through 2015.
(You can read Tom Richardson's comprehensive coverage of RFG's latest half-year results here)
Furthermore as Retail Food Group increases the size of its supply and retail coffee industries, it becomes increasingly able to leverage its scale and lower costs whilst driving output.
With an estimated 6,700 coffee businesses in Australia according to an IBISworld report, RFG's ~1,822 domestic outlets give it around 27% of the market – leaving plenty of room for expansion while also creating a firm foothold for organic growth.
Fortunately for shareholders, Retail Food Group is focussed on both kinds of growth, with the company looking for acquisitions which fit its criteria, while still working to drive improvement in its existing businesses.
As an example of organic growth, Donut King – RFG's oldest franchise – grew its earnings before tax by 23.3% in the first half of 2015. Maybe it's because coffee and doughnuts go so well together.
The outlook for the second half of 2015 is just as glossy, with management forecasting a Net Profit After Tax result of $55m (up from previous estimates of $50m), some 49% higher than the full-year 2014.
While dilution from share issues and the dividend reinvestment plan will have affected individual Earnings Per Share (EPS), shareholders are still looking at EPS growth in the vicinity of 30%, which is not to be sneezed at.
Tom Richardson wrote yesterday that the stock looked an attractive buy at yesterday's prices of $6.99.
I'd go one further and say that the company still looks like a good long-term purchase at today's prices of $7.50.
