The Card Factory PLC (LON:CARDC) share price is down by over 14% year to date, and over the last five years has fallen by over 80%. Despite what the stock performance would suggest, this company remains one of the most popular retail greeting card manufacturers in the United Kingdom.
Card Factory stock is listed on the London Stock Exchange. The leading omnichannel brand has 8,000 employees across 1,020 stores worldwide who help customers every day to celebrate any special occasion with personalised greeting cards and gifts. But where is this business heading? Should I see the drop in stock price as a buying opportunity or a sign to stay away? Let’s take a closer look.
Key financials
Today, Card Factory has a market capitalisation of over £178 million, trading at a price-to-earnings ratio of 21.7. The latest financial year report shows that it had £364.4 million in revenue. Its operating cash flow moved up 42% in its 2022 fiscal year ending in January, reaching £114 million. This level of growth suggests the company is making steady progress in its recovery from the pandemic. Moreover, there was an increase in EBITA to £85.6 million, yet net profit margins landed at a tight 2.22%.
The Card factory last paid dividends to shareholders in 2019. With COVID-19 lockdowns forcing its shops to close, management prudently decided to restrict capital outflows.
Today shops have resumed normal operations. But with various loan facilities piling up, the firm won’t be resuming dividend payments until after these financial obligations and other lease liabilities have been repaid. Given that inflationary pressure has driven up interest rates, that seems like a sensible decision, in my opinion.
Analysts’ consensus on Card Factory’s share price?
A range of brokers provides their opinion on whether the Card Factory shares should be bought, kept, or sold based on their current share value. While relying solely on these predictions isn’t a successful strategy, in my experience, it does provide some interesting insight surrounding market sentiment.
Today, Card Factory shares have a buy rating from multiple analysts with a forecast price target of 110p. It seems the ongoing stock market correction has dragged this retail stock to a level where investment analysts believe a buying opportunity has emerged. And I can’t deny using short-term volatility to buy stocks at a discount is a lucrative strategy.
Despite the downward trend in the Card Factory share price, the P/E ratio is still ahead of the general market average. Personally, I see this as an indicator that investors are optimistic about the future performance of these shares.
What percentage of Card Factory is owned by insiders and institutions?
Card Factory has institutional investors on its share registry, and they own a significant stake. Generally, having the backing of financial institutions does lend certain credibility. And it also makes it easier for the business to raise additional capital through equity from institutional investors.
In total, around 51% of Card Factory’s shares outstanding are owned by financial institutions – 20% of which is held by Teleios Capital Partners.
Something else to note is that around 5.4% of the firm’s shares are held by insiders, including the four top executives:
- Paul Stephen Moody – Non-Executive Chairman
- Darcy Willson-Rymer – Executive Director & Chief Executive
- Kristian Brian Lee – Chief Financial Officer
- Ciaran Joseph Stone – Secretary & General Counsel
These are primary managers responsible for the smooth running of the business. And personally, I like to see a good level of insider ownership as it signals confidence from within the leadership team.
Final thoughts on Card Factory’s share price
Looking at the Card Factory share price in the past five years, it’s obvious that the stock hasn’t been delivering on expectations. And the pandemic only exacerbated the issues.
Nevertheless, the company has seemingly lots of growth opportunities ahead if management can navigate the balance sheet to firmer ground. But that is a big if. And there is the ongoing challenge of a shrinking interest in buying physical greeting cards by younger generations.
I believe there are far better UK stocks to be found elsewhere for my portfolio. Therefore, I’ll be keeping this business on my watchlist for now.
Originally Published on The Money Cog
Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.