Recently listed value-shoe retailer Shoe Zone (SHOE) may not offer the alluring growth story boasted by some of this year's other IPOs. However while the top-line growth isn't headline grabbing, a forecast yield of over 6 per cent, significant scope to boost profitability and a bargain-basement rating that would rival the price tag on any of its shoes means its shares should be snapped up.
IC TIP:
Buy
at
196p
Tip style
Income
Risk rating
High
Timescale
Long Term
Bull points
- Big yield on offer
- Hugly cash generative
- Low rating versus sector peers
- Scale offers competitive advantages
- Scope for significant cost savings
Bear points
- Minimal sales growth
Shoe Zone's strategy is more concerned with profit growth, than sales growth, along the same lines as WH Smith (SMWH), whose former chief executive Kate Swann trumpeted the adage "sales are vanity, profits are sanity". And, like WH Smith, Shoe Zone is a very cash-generative business, with no debt, a healthy cash pile and cost-cutting opportunities.