RCG Corporation Ltd [ASX:RCG] climbed 7.6% this morning to 85 cents per share.
Why did the RCG Share Price rocket?
The retailer released its full-year results for FY17.
Revenues were up 43.7%, to $636 million.
RCG owns various distributors, which includes shoe retailer Hype DC.
RCG acquired the company on 4 August 2016. And it’s already becoming a major earnings contributor. In FY17, Hype DC delivered $67.1 million in earnings before interest, tax, depreciation and amortisation. But Hype DC was also the reason for RCG’s overall earnings decline.
Impairments to Hype DC’s brand name totalled $9.7 million, which led to a 3.3% decline in net profits.
So, why did the stock rally this morning?
RCG has continued to have success, rolling out more stocks and increasing their cash earnings. Cash flow from operations rose 2.4%, to $45.4 million.
The retailer also increased dividends paid. RCG paid a final 3 cents per share, taking their full-year FY17 dividend to 6 cents.
Future for RCG?
RCG is a stock I’ve liked for a while. The retailer caught my eye in June this year. It has traded down along with other retailers year-to-date. That appears to be because skittish investors were worrying about Amazon.com, Inc. [NASDAQ:AMZN].
The stock is still down 42.7% this year. But it’s risen substantially since June, up 42.8%.
Is it too late to jump in?
Well, that really all depends on how much growth RCG has left. Look at the table below.
It shows RCG’s free cash flow, growth and average growth from 2007 to 2017. As you can see, average growth is very high, and the retailer hasn’t had a negative free cash flow period so far.
But it’s probably too optimistic to think RCG can grow free cash flow at 75% even over the next five years. Nevertheless, it’s a stock still worth watching as they open more stores and grow their online presence.
Junior Analyst, Money Morning
PS: If you’re looking for income-producing stocks with potential, check out these five dividend stocks trading on the ASX right now.