The Adairs Ltd (ASX: ADH) share price has started the week in a positive fashion despite the market volatility.
In afternoon trade, the homewares retailer's shares are up 1.5% to $3.70.
Why is the Adairs share price rising?
Today's gain by the Adairs share price appears to have been driven by a bullish broker note out of Morgans in response to the company's plan to make a new acquisition.
In case you missed it, last week Adairs announced an agreement to acquire Focus on Furniture for $80 million. Focus currently operates 23 stores across Australia and generated revenue greater than $150 million during FY 2021.
Management expects the deal to be immediately earnings per share accretive. In fact, it is forecasting pro forma double-digit earnings per share accretion during the first full year of ownership in FY 2023.
What did Morgans say?
According to the note, the team at Morgans is positive on the deal. It believes it will complement its core business and provide network expansion opportunities.
In response, the broker has retained its add rating and lifted its price target on the company's shares to $4.80.
Based on the current Adairs share price, this implies potential upside of 30% for its shares. And with Morgans forecasting a 23 cents per share fully franked dividend in FY 2022, the total potential return stretches to a very attractive 36%.
Overall, the broker sees Adairs as a great option for investors and feels its shares are cheap at the current level, particularly given its attractive growth and dividend profile.
The Adairs share price is up 8% since the start of the year. This is broadly in line with the performance of the S&P/ASX 200 Index (ASX: XJO) over the same period.
