RadioShack Lifts Shareholders Wealth - Analyst Blog

In a move to raise its shareholders’ value, the Board of Directors of RadioShack Corp. (RSH) has deiced to increase the authorization of its existing share buyback program from $290 million to $500 million. Although the company did not provide any closing date of this enhanced share repurchase program; it, however, announced that a significant part of this program will start as quickly as possible.

We consider this move appreciable since RadioShack has positive net cash balance and is generating sequential positive free cash flow. At the end of the second quarter 2010, the company had approximately $250.7 million of net cash balance (total cash less total debt) or around $1.96 per share of net cash balance. During the first half of 2010, RadioShack generated 416.3 million of positive free cash flow.

RadioShack is one of the most experienced and trusted consumer electronics specialty retailers in the U.S. The company continues its solid performance supported by significant growth of wireless businesses. The wireless category, which represents one-third of total sales, is likely to maintain momentum in near future due to massive demand for smartphones. Emphasis on innovative wireless devices like iPhone 4 helps RadioShack improve its bottom line.

RadioShack’s average ROE for trailing twelve month is 20%, significantly higher than the industry average of just 14.7%. We expect the company’s Return on Invested Capital and free cash flow to increase in the future quarters due to huge boom in the wireless industry. RadioShack re-launched its “The Shack” brand of retail store chain and put its emphasis in wireless technology in order to stay aligned with future trends.