Shares for furniture retailer Nick Scali (NCK) have surged in the past 12 months with solid sales growth and continued margin expansion.

Founded in 1962 by Nick Scali and listed in 2004, NCK has a track record of delivering consistent earnings growth and a steadily increasing stream of fully-franked income to shareholders, according to Adrian Ezquerro, senior analyst for Clime Smaller Companies Fund, writing in The Australian.

Management recently upgraded full-year earnings forecasts to a range of $36 million to $37 million, up 40% on FY2016. Same store sales growth has continued at double digit rates, largely reflecting significant volume growth in its store network.

NCK is expected to move into its new Sydney distribution soon, which will see its capacity increase by 250% and assist the business in realising further efficiency gains.

The balance sheet shows net cash of about $16 million. Also noteworthy is the fact that NCK directly owns seven properties that are held on the balance sheet at cost, suggesting some latent value exists in its asset base.

Operating cash flow was $18.2 million for the first half.

NCK is planning to open a further seven new stores in FY2018, indicating store growth of about 15% on its existing footprint of 45 stores. This includes the company’s entry into the New Zealand market, which has been in the planning stage for some time.

Management’s existing store network target remains at 75, while further offshore expansion and acquisitions present as further long-term potential growth levers.

On current forecasts, NCK shares still trade at a discount to market multiples with an intrinsic value of about $7.90. At the same time, Clime believes NCK offers investors a solid forward yield of about 4.6%.

From The Australian