Not long ago, people were wondering whether this electronics retailer was to become another victim of Britain’s high-street bloodbath. At the end of 2011, you could have picked up a share for less than 10p.
Since then it has done a pretty good job of turning itself around. There’s no doubt that it has been helped by the demise of rivals such as Comet and the boom in gadgets like tablet computers. But it has also been getting out of unprofitable businesses and slimming down its store portfolio.
Market share data shows that it is also holding its own against cutthroat internet retailers such as Amazon and AO.com.
Dixons (LSE: DXNS) has shown itself able to make money throughout the year rather than being overly reliant on Christmas. Profits have grown strongly over the last couple of years and are expected to keep on doing so for the next two years.
Then there’s the prospect of a tie-up with Carphone Warehouse to create a new retailing giant. A combination of the two would probably see lots of costs being cut and increased buying and selling power in tablet computers, which should push profits up.
Dixons shares are no bargain on 16 times this year’s expected earnings. But with the potential for profits to keep on powering ahead, they are still worth buying.
Verdict: buy at 45p