Could Dunelm Group plc Be A Better Buy Than ASOS plc, Sports Direct International Plc Or Next plc?

FTSE100Investors in Dunelm (LSE: DNLM) have had a tough time in recent months, with shares in the homeware retailer sliding by 20% in the last three months. However, the company continues to perform well and this week released an upbeat set of fourth-quarter results that showed a pickup in sales in the final quarter of its financial year, which contributed to an increase in net profit of 7% for the year.

Looking Ahead

Indeed, Dunelm has weathered the recession extremely well. The company has posted five consecutive years of earnings per share (EPS) growth, with the bottom line increasing by an average of 20% per annum over the last five years. Furthermore, Dunelm is forecast to grow EPS by 14% next year, which is roughly twice the growth rate of a typical FTSE 100 stock. Clearly, such growth rates do not come cheap, with Dunelm trading on a price to earnings (P/E) ratio of 16.2. However, when combined with the strong growth rate, a price to earnings growth (PEG) ratio of 1.2 seems relatively attractive.

The Competition

Of course, the general retail sector contains other options for investors. For example, Sports Direct (LSE: SPD) continues to post highly attractive growth numbers. The company is forecast to deliver a 26% growth in EPS this year and an increase of 15% next year as it continues to seek international expansion. As with Dunelm, a relatively high P/E of 19.2 is countered by great growth prospects, meaning a PEG ratio of less than 1 is highly appealing.

Next (LSE: NXT) and ASOS (LSE: ASC) (NASDAQOTH: ASOMF) could also perform well in future. Next, for example, could prove to be a great investment as it offers strong growth prospects as well as an above-average yield. Indeed, EPS is forecast to grow by 11% this year, while special dividends are set to mean a yield of 5.3% at current prices.

Meanwhile, ASOS has disappointed this year, with shares in the online fashion retailer falling by over 50%. However, even though the current year is set to be highly challenging (with profits due to fall by 16%), ASOS is expected to return to high levels of growth next year when EPS is forecast to increase by 40%. Certainly, there could be further volatility in the share price over the short to medium term, but it still could be a strong performer in the long run as it focuses on expansion into new markets such as China.

Returning To Dunelm

So, there appears to be a considerable amount of potential among the four companies, with Dunelm offering an appealing mix of growth and value at current price levels. Indeed, it could prove to be the major winner, since its products tend to be more discretionary rather than necessity. As such, further improvements in the macroeconomic outlook for the UK could benefit it to a greater extent than its peers.

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Peter does not own any of the above shares. The Motley Fool owns shares in ASOS.