Mention the office supply business to most investors these days, and the response is likely to elicit little more than a yawn.

Few investors can recall the industry’s heyday back in the 1990s. Back then, physical stores were being built at a breakneck pace.

Industry leader Staples, Inc. (SPLS) was the best of the bunch — its cumulative stock performance has trounced the market as a whole, and even industry behemoth Wal-Mart Stores, Inc. (WMT) since March of 1990.

After an extended rough stretch that has seen the brick-and-mortar space grow frustratingly saturated and a new competitor in Amazon.com, Inc. (AMZN) that is single-handedly changing the retail industry, Staples is again ready to flex its office supply muscle.

Staples is on the cusp of finally snatching arch rival Office Depot Inc (ODP), which already merged with OfficeMax to address the oversupply plaguing the industry. A big obstacle remains, but 20 years after first trying to buy its key rival, the deal is highly likely to go through.

Staples is evolving, and while the process of thinking outside the brick-and-mortar realm has been frustrating for investors, a number of changes have been afoot and are ready to push the company forward.

Staples’ Overlooked Online Strength

Investors and consumers probably don’t realize that Staples has a leading and impressive online presence. Staples.com is the third-largest internet retailer, and will grow even stronger by purchasing Office Depot, also in the top 10. Only Amazon and Apple Inc. ( AAPL ) outflank it online.

There is, of course, work to do to compete more effectively against Amazon. All traditional retailers, including electronics giant Best Buy Co Inc (BBY) are greatly expanding the number of stock keeping units offered online. Staples’ online offering has grown tenfold, from 100,000 SKUs to more than 2 million. Again, the Office Depot purchase should help increase product offerings.

Staples’ fourth-quarter online sales (PDF) grew 1% and profit margins grew a percent as well. Nothing to brag about in terms of overall growth, but Staples is rationally trying to mix growth with profitability — unlike a key rival. It is well documented that Amazon focuses on the latter, and despite its online dominance, its long-term profit outlook is still murky. So is its potential as an investment.

Brick-and-Mortar Efficiencies

Two decades ago, Staples tried to rationalize the abundance of office supply superstores throughout the world. Back then, online was in its infancy and the Federal Trade Commission, which rules on large mergers, nixed the deal.

Very surprisingly, the FTC is using the same playbook, arguing that letting the last two major office supply retailers merge is anticompetitive and will harm consumers. There is the risk of higher prices and less competition, but it’s really difficult to see a scenario where, in the company’s words, society is harmed by “higher prices for sticky notes, pens, pencils, notepads, file folders, paper clips and copy paper.”

While recently, U.S. District Judge Emmet Sullivan didn’t decline to block the deal, he seemed to side with Staples in the notion that the FTC’s case against the merger is seriously flawed. A key argument has been that large customers will be hurt, but at this point it seems unlikely to keep the merger from being completed. In fact, the company is confident the deal will close and is no longer speculating it will need a plan B.

Staples is still being realistic and realizes it needs to continue to reduce its brick-and-mortar presence. It has closed 242 stores “over the past couple of years.” That will likely accelerate if Office Depot is bought. In essence, the merger likely saves the prospects for physical office stores throughout the world.

There are simply still too many, and Staples can rationalize the store bases down to the most profitable ones. It sees synergies from the deal of up to $1 billion, a huge amount that should help push earnings up to a couple of dollars per share within a few years.

SPLS Stock: Cash Flow Trends

Rightsizing of Staples’ business includes hefty cost-cutting moves. Two years ago, management targeted $250 million of cost cuts in both 2014 and 2015. On its latest earnings call, it announced it exceeded that total $500 million goal, a sign of credibility that investors hope can be built on.

Staples currently expects to generate $600 million in free cash flow for the coming year. This works out to nearly $1 per share, leaving room to buy back stock and support a very generous dividend yield (more on that below).

Staples is also expanding into complementary — higher-margin — product categories. Office supplies have been the name of the game, but initiatives to move into breakroom supplies, furniture, and copy and print services, such as those more traditionally offered by print shops.

This last business has grown impressively, accounting for more than 10% of retail sales and helps keep the stores relevant.

A Worthwhile Value Play

Staples qualifies as a low-expectations investment. It is trading at a forward price-earnings ratio of only 11 — about half the current market average of 24. This leaves plenty of upside should the Office Depot merger go through and earnings start to move sustainably forward.

The risk of these types of investments is, of course, that Staples’ stock continues to be value trap. Fortunately, with a current dividend yield of 4.7%, investors are getting paid to wait. Income-minded investors wouldn’t mind sticking around indefinitely. There is obviously stock volatility in the equity, but the 10-year corporate bond rate currently hovers around 2.3%.

Staples is also working hard to improve its European business, which stemmed from the ill-timed acquisition of Corporate Express back in 2008. It detailed a fourth-quarter profit in Europe, but the business is still struggling, which leaves upside that right now is only potential.

Add it all up and investors have the potential for above-average income generation and the potential for the stock to double within three years as the Office Depot merger is finalized, cost-cutting intensifies and the earnings multiple improves from rock-bottom levels.

As of this writing, Ryan Fuhrmann did not hold a position in any of the aforementioned securities.

More From InvestorPlace