Why the Retail Food Group Ltd share price is up 47% so far this year

The Retail Food Group Ltd (ASX: RFG) share price has soared 47.5% so far year-to-date, with the share price rising from around $4.60 to the current price of $6.93.

That has come on the back of strong revenue growth over the past 12 months.

The franchisor with brands such as Gloria Jeans, Michel’s Patisserie, bb’s Café, Pizza Capers and Crust Gourmet Pizza, reported 31% growth in revenues for the 12 months to end of June 2016. Net profit was up 79% and dividends rose 18%. When many commentators were lamenting the lack of growth in revenues, Retail Food showed that some companies were still delivering if investors looked outside the usual suspects.

Even better for shareholders was the company’s forecast for a 20% increase in net profit after tax for the 2017 financial year.

Retail Food Group 1 year Chart Sep 2016

Source: Yahoo Finance

It seems many investors had underestimated Retail Food, perhaps overshadowed by the phenomenal results achieved by Domino’s Pizza Enterprises Ltd (ASX: DMP) in the past several years.

However, it seems some investors have caught on now, and with the company trading on a P/E ratio of just 17.2x, well below Domino’s 70.8x, it could be worthy of adding to your watchlist.

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Motley Fool contributor Mike King has no position in any stocks mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia owns shares of Retail Food Group Limited. 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.

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