DXNS – looking good?

Everybody has heard of Dixons Retail (LON:DXNS) . It is looking good as a recovery play. Despite a few years of losses, analysts reckon that it will start making profits again. It is trading on an EV/Sales of 0.14, as against 0.45 for the specialty retailers sector. That’s cheap. Is it cheerful?

The chart has shown positive momentum for over a year now, as you can see below.

Dixons is one of the most-shorted stocks, according to Square Mile Data. This presents a good opportunity for some nice share price action if the shorters find themselves on the wrong side of the trade … which I believe to be the case. New CEO Sebastian James recently tweeted that Easter trading went very well.

Fears about the internet are likely to be overstated, There is now very little difference in retail price between Amazon and Dixons. It also seems that manufacturers prefer working with Dixons because they like to push their latest models, and Dixons is a better place for them to do that than Amazon.

So, to summarise: recovery showing definite signs of success, cheap valuation, lots of fresh management, backdrop of overstated negative investor sentiment in the sector, share price momentum, and heavy shorting itching to get burnt. Anything I missed?

According to my calendar, full year trading statement is due on 16 May.

Looks good. Let’s see.

Kudos go to CockneyRebel for providing the key insights on the investment case.

31.12p. ASXX 3299