Strong cash flow, a high dividend yield, a premium brand name and a bargain share price. What’s not to like? In the case of Laura Ashley, the market seems to have dumped the stock into the too good to be true category. Despite years of consistent performance, firm is valued at a discount to most of its UK-listed peers.

I’m not convinced this view is correct. UK trading is strong and I believe the firm’s Asian expansion has some way to go. Indeed, Laura Ashley is on my own watch list and at current levels I’m seriously considering a buy. Stockopedia likes the firm too -- it has a StockRank of 95.

Recent price falls have taken Laura Ashley shares back to levels last seen in March. I’ve taken a closer look at the company to find out whether the numbers really stack up. Are recent price falls offering investors a second bite of the cherry?

Understanding the business

The Laura Ashley business has three main elements. A 198-store chain of shops in the UK, 296 franchised international stores and a manufacturing operation. The firm also trades online and has a small but fast-growing hotel business in the UK.


Laura Ashley’s readily-recognisable style has always worked well with aspirational buyers in the UK and overseas.

In more recent years, it’s become clear that Asia is one of the key growth opportunities for the firm. It already has successful franchised operations in countries such as Malaysia, Hong Kong and Japan. Crucially, however, Laura Ashley does not yet have a presence in Asia’s two largest economies, China and India.

Any remaining doubt about Laura Ashley’s commitment to Asian growth was quashed in June, when the firm spent £31.1m on a Singapore building for its new Asian headquarters and said it had identified “significant growth prospects” in Asia.

The move surprised the market but as Stockopedia’s Paul Scott explained, it does appear to be both above board and logical.

Screening for value

Value investors might want to note that Laura Ashley qualifies for two of Stockopedia’s top-performing value screens, the David Dreman Low PE and High Yield screens. These screens have delivered an average annualised return of 21% since their inception.

Interestingly, Laura Ashley qualified for both screens in April 2015, at a time when the firm’s share price was 29p, slightly above the current price…

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