Can RadioShack Corporation (RSH) Turn Things Around?

It’s no Apple

I have visited Apple stores in the United States and Europe.  Apple does a great job with its well-designed, clean, clutter-free stores that scream cutting-edge technology and sales force that serves as an extension of its brand. Yet moving forward, drawing traffic to these stores will depend on Apple’s ability to innovate, given that these stores have few product offerings.  By contrast, although RadioShack’s stores currently aren’t as sleekly designed, they are making significant progress on both fronts: store design and product offerings.

3 critical considerations

1. Price and market cap – RadioShack shares have lost approximately 90% of their value over the past three years. This company has annual sales of $4.3 billion, yet a market cap of only around $290 million. RadioShack Corporation (NYSE:RSH) has $435 million available in cash, which is more than its market cap.

2. Dividend yield – Not all that long ago, RadioShack had predictable earnings and paid a generous dividend of $1.50 per share. If RadioShack could once again become profitable and re-institute a reasonable dividend, its share price could easily double, triple, or even quadruple.

3. Market and sector performance – As shown by Best Buy’s resurgence, the sector appears to have put the worst behind it. Still, RadioShack’s share price and market cap appear to unfairly assume the worst-case scenario: that any efforts to turn around the business will not succeed and RadioShack will eventually go bust (unlike other stocks in the sector).

My Foolish take

Although I don’t like the images and associations that are top of mind when I hear the word RadioShack (geeks fooling around with ham radios and such), I agree with Mr. Magnacca’s message that this is not my grandfather’s RadioShack Corporation (NYSE:RSH). Price matters and at around $3 per share, even though this company is not without substantial risk, the risk/return is almost attractive enough to consider making a small bet. After all, everyone has already assumed the worst for this struggling company and that is more than reflected in its valuation.

The article Can RadioShack Turn Things Around? originally appeared on Fool.com and is written by Ryan Peckyno.

Ryan Peckyno has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and RadioShack. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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