Buy bargain WH Smith ahead of upturn

WH Smith has endured five years of falling sales while the UK has been mired in its on-again-off-again recession. But, during this time, the stationery, books and mags retailer has produced double-digit EPS growth every year without fail, while returning nearly a third of its current market cap to shareholders through dividends and share buybacks (see table). And with the outlook for key end markets finally starting to improve, a 4 per cent yield on offer, net cash on the balance sheet and a derisory rating compared with peers, it looks like a prime time to buy shares in this overlooked retail sector star.