Stock of the day 17/09/2015 – Card Factory PLC

Since its IPO 16 months ago Card Factory has gone from strength to strength, nearly doubling its stock price in the process.

Can this upward trend continue following its interim results next Tuesday?

Admittedly, Card Factory did take a while to get into its current groove. After opening 2015 at £2.84 (compared to its May 2014 IPO price of just over £2) the stock had slipped below the£2.80 mark by the middle of January, despite a full year trading statement towards the end of the month that saw Card Factory post an 8.1% jump in revenue alongside the opening of 51 new stores in the UK.

The company struggled to break that £2.80 until the start of March where, despite a brief wobble, it began to climb with more vigour, crossing £3 for the first time on the eve of its preliminary full year results announcement at the end of the month. The results themselves were largely positive, with an increase in operating profits from £72.9 million to £79.4 million countered by a slowdown in like-for-like sales growth from 3.1% to 1.8%. Yet investors instead focused on Card Factory’s lack of clarity surrounding its previously pledged future cash return, causing the stock to fall over 4% back to £2.85.


(Source: IT-Finance.com 17/09/2015)

However, that report also contained hints that Card Factory was eyeing future acquisitions, with Paperchase the most likely target; this meant that the stock soon resumed its ascent, and by the middle of May, one year since its IPO, the company was trading at £3.43. The company’s first quarter trading statement at the end of May helped lift the stock even further, hitting a peak of £3.71 as Card Factory announced a 7.5% rise in its Q1 revenue year-on-year, alongside 19 new stores and the promise that the company was on-track to meet its full year expectations.

These highs didn’t last long, with the stock damaged by a £50 million share sale by senior staff that sent Card Factory to a 6 week low of £3.14 by the middle of July. Yet this proved to be a blip on the company’s otherwise stellar 2015, and by the data of its half year trading statement in the middle of August it was back at £3.66. The results first 6 months of Card Factory’s fiscal 2015 were of a similar ilk to the year’s previous announcements, with an 8% leap in total sales as the company crossed the 800 store mark, putting the company on the path to an all-time high of £3.87 by the start of September.

Things have cooled since then, and Card Factory is at a current trading price of £3.67 (IT-Finance.com, 17/09/2015). However, Tuesday’s interim results could reignite the stock, especially since Card Factory claimed in its half year report that the details of its future cash return plans would be announced in the September statement. There was also the interesting news that the company’s founder Dean Hoyle has become a ‘significant shareholder’, and chairman, in discount retailer The Works, potentially making it a takeover target for the M&A ready Card Factory.

Card Factory has a consensus rating of ‘Buy’ and an average target price of £3.62.