Card Factory , the U.K.-based greeting card and gift retailer, is on the cusp of a major growth phase that could boost its stock price by more than 115% over the next 12 months, according to analysts at Investec. The bank’s analyst labeled the London-listed stock as “materially undervalued” as the company announced the resumption of dividends earlier this month after a five-year hiatus. The stock , which also trades in the U.S. over the counter, is on offer with a 6.5% dividend yield. “Over the past 3 years, management has restored balance sheet strength and has successfully delivered an operational and financial turnaround,” said Investec analysts led by Kate Calvert in a research note to clients on June 18. Investec raised its price target to £2 ($2.53) a share, which points to a 116% upside potential. U.K. shares are generally priced in pence, with 100 pence equal to one British pound ($1.28). CARD-GB 5Y line The company, which traces its origins to 1997 in northern England, has quickly grown to operate more than 1,000 stores in the U.K. but had a near-death experience during the Covid-19 pandemic when much of its physical real estate was forcibly closed. However, earlier this month, Card Factory said its 2024 fiscal year showed improved profitability, with the company expecting normal growth rates to return. The company’s profit margins, at 12.2% before tax, exceed the industry average, according to Calvert. “Despite another year of growth, dividend resumption and a return to normalised funding terms, CARD is materially undervalued ⦠in our view,” she added. However, not all analysts share Investec’s optimistic outlook. Investment bank UBS has taken a more cautious view of Card Factory’s near-term prospects. “We believe that Card Factory’s strategy of growing store real estate and building share in the gifts and celebrations market can support sales growth and margin in the long term,” said UBS analyst Saranja Sivachelvam in a research note to clients on June 12. “However, we remain cautious in the near term given market uncertainty.” UBS predicts Card Factory will earn £65 million in the next financial year, with sales running up to about £535 million. The investment bank raised its price target to £1.16 a share, indicating a 26% upside potential, but also maintained its “neutral” rating. “At our price target, we would see the company trading at [8.7 times forecast price to earnings ratio], which is in line with its [five-year] average of 8.6x, and do not see any triggers for a material re-rating in the next 12 months, keeping us at a Neutral rating,” Sivachelvam added.
Source Agencies
