The Accent Group Ltd (ASX: AX1) share price has started the week strongly.
In afternoon trade, the footwear focused retailer's shares are up 2% to $2.42.
This latest gain means this ASX 300 share is now up 45% since the start of the year.
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Can this ASX 300 share keep rising?
The good news for investors is that one leading broker believes that this ASX 300 share still has plenty of room to climb higher from current levels.
According to a note out of Goldman Sachs, its analysts have reiterated their buy rating with an improved price target of $3.10.
Based on the current Accent share price, this implies potential upside of 28% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of 15 cents in FY 2023. This boosts the total potential return by a further 6.2% to beyond 34%.
Earnings potential better than you think
Goldman is bullish on this ASX 300 share due to its belief that the market is underestimating its earnings potential. It also highlights that its target demographic is less likely to be impacted by rising rates. The broker commented:
We believe the market is underestimating the full earnings potential of AX1's business, which comprises an attractive distribution business, a set of vertically owned brands, and a portfolio of strong retail banners. We see AX1 as well protected from a potential slowdown in discretionary spend given its exposure to a younger consumer and performance footwear.
In respect to its earnings potential, the broker highlights its store roll out opportunity and potential market share gains. It adds:
The business is yet to achieve its full earnings potential, in our view, notwithstanding a strong recovery post lockdowns. Key sources of incremental upside will be: (1) store roll out in key banners; (2) market share gains among key distributed brands; and (3) vertical product margin upside from a growing mix of apparel. We believe this can be unlocked through the more focused execution strategy prioritising core banners/brands with increased ROIC hurdles (~30%) and improved product execution, particularly in apparel.
Overall, Goldman believes this will underpin EBIT of $170.6 million by FY 2025, which is up $62.3 million from FY 2021 and 12.7% ahead of consensus estimates.
This could make Accent one to consider if you're looking for exposure to retail sector.
