Down 32% in 3 months, is the Super Retail Group Ltd share price too low?

What happened? The share price of retailer Super Retail Group Ltd (ASX: SUL) has fallen an incredible 32% since early March as investors have become increasingly concerned about the impact Amazon and others are having or will have on the business.

A trading update in early May showed a strong start to the year for the group’s two largest segments, Sports and Auto, however investors view these two segments as ones that Amazon will be particularly strong in.

Should we be concerned? It really feels like the share price is falling due to poor sentiment only as the average of the analysts that cover the company believe it will continue to grow this year and next.  In fact, at the lower share price, Super Retail is starting to look cheap.

Analysts are forecasting the following for the 2017 financial year (ending 30 June):

  • Earning per share of 66 cents (2016: 57 cents)
  • Dividend per share of 45 cents (2016: 41 cents)

They are then even more bullish about the 2018 financial year:

  • Earning per share of 74 cents (2016: 57 cents)
  • Dividend per share of 50 cents (2016: 41 cents)

At the current share price of $7.37, this puts the company on a 2017 forward price to earnings ratio of just 11.1 and a 2018 PE of under 10! Add to that a dividend yield of 6% fully franked next year and you could be looking at a bargain buy.

Is the Super Retail Group Ltd share price too low? That question can only be answered by looking into a crystal ball, however there are already plenty of online competitors that Super Retail are successfully competing against, so I’m willing to give them the benefit of the doubt for now.

At the current price it represents one of the better price-to-earnings and dividend yield options on the market, however some investors are very reluctant to invest in retail at the moment.

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Motley Fool contributor Andrew Mudie has no position in any stocks mentioned. The Motley Fool Australia owns shares of Super Retail 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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