Company in the news: WH Smith
WH Smith has avoided becoming a high-street casualty, so is it worth buying? Phil Oakley gives his verdict.
High-street newsagent and bookseller WH Smith (LSE: SMWH)has spent years defying the sceptics. Many analysts struggle to understand why it hasn't become yet another high-profile British retail casualty.
They point to the company's inability to generate higher sales as a key weakness, particularly at a time when many of the items it sells are also sold online, or in supermarkets.
Yet, the business remains in rude health, as shown by last week's trading statement. It continues to generate lots of free cash flow, mainly due to its ability to sell stuff to captive customers in airports and railway stations.
It also seems to beable to keep squeezing out more profits by cutting out low marginsales and selling more products with fatter margins.
WH Smith's ability to keep growing its profits and dividends in recent years, despite the challenges it faces, has seen its sharesdo rather well. Its success may remain a mystery to some, butthe market no longer seems concerned that the good days willend soon.
However, the shares now trade on 15 times forwardearnings and yield 3% that's fine, but hardly appetising.Profits may grow for a while yet, but that looks priced in now.