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I have long talked up the terrific investment potential of WH Smith (LSE: SMWH), and my love for the stationer is being shared by the broader investment community right now.

Its share price has climbed 15% in the past two months alone, taking gains since the turn of 2017 to 24% and resulting in it currently sitting atop record peaks above £19.30 per share. And despite these chunky rises the company still carries pretty decent value, in my opinion.

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In the year to August 2017 the London firm is predicted to have delivered a 7% earnings improvement. And it is expected to follow this up with a similar bottom-line rise in the present fiscal period, resulting in a forward P/E ratio of 17.6 times.

While this reading perches above the widely-regarded value watermark of 15 times, I reckon a stock with as strong an earnings record as Smiths — not to mention the brilliant profits potential of its expanding international base — merits this slight premium.

Foreign favourite

Indeed, investors need to consider the brilliant progress Smith’s Travel division is making. The company noted last month that the unit “continues to deliver a strong performance with good sales across all of our channels and our new store opening programme both in the UK and internationally is in line with our plan.”

And the newsagent is splashing the cash to latch onto the brilliant sales opportunities of these overseas markets. It noted recently that “we continue to see further opportunities in the international news, books and convenience travel market,” and this is hardly a surprise given that air passenger numbers are expected to keep on booming in the coming decades.

With the company also working hard to improve profitability at its High Street operations through stringent cost-cutting and margin improvement, and plans to integrate Post Offices into its stores also impressing, I reckon there is plenty to get excited about over at Smith’s right now.

Not quite there..?

I’m afraid my optimism for WH Smith doesn’t extend to fellow retail play French Connection (LSE: FCCN), however.

The fashion firm has been lossmaking for many years now, and City analysts do not expect the business to flip into the black just yet — losses of 1.4p per share are forecast for the period ending January 2018.

And while the Square Mile expects French Connection to finally flip into the black with earnings of 0.4p in fiscal 2019, I for one retain a cautious view when it comes to current projections.

The Camden-based business announced today that operating losses before tax narrowed to £5.7m between February and July from £7.9m a year earlier. And chairman and chief executive Stephen Marks commented that “we have definitely seen momentum build in the first half of the new financial year with improvements across all the divisions despite difficult trading conditions.”

However, French Connection still saw sales in the UK and Europe flatline in the period, and this could persist as the rising pressure on Britons’ wallets look set to persist amid rising inflation and stagnant wage growth. So while the company’s self-help plans are helping to improve performance more recently, I reckon it could remain a hard ask to expect it to report profits any time soon.

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Royston Wild has no position in the shares mentioned. The Motley Fool UK has recommended WH Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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