Card Factory Plc – Value Analysis (LONDON:CARD) : December 29, 2017

Capitalcube gives Card Factory Plc a score of 72.

Our analysis is based on comparing Card Factory Plc with the following peers – WH Smith PLC, Conviviality Plc, Findel plc, Laura Ashley Holdings plc and Marks and Spencer Group plc (SMWH-GB, CVR-GB, FDL-GB, ALY-GB and MKS-GB).

Investment Outlook

Card Factory Plc has a fundamental score of 72 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It’s current Price/Book of 4.05 is about median in its peer group.
  • We classify CARD-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • CARD-GB‘s relatively high profit margins are burdened by relative asset inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • CARD-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While CARD-GB‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • CARD-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

CARD-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 12.54% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 22.63%), and a well-cushioned interest coverage level of 32x, CARD-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 5 peers for the company have an outstanding debt balance.

CARD-GB has maintained its Quick & Able profile from the prior year-end.

  • CARD-GB‘s interest coverage is its highest over the last four years and compares to a low of 1.51x in 2013.
  • While its interest coverage increased to 32x from 23.64x (in 2016), its peer median decreased during this period to 8.58x from 16.53x.
  • Interest coverage rose 16.31 points relative to peers.
  • CARD-GB‘s debt-EV has increased 2.28 percentage points from last year’s low but is still below its four-year average debt-EV of 13.38.
  • Though its debt-EV increased to 12.54% from 10.26% (in 2016), its peer median remained relatively stable during this period at 22.63%.
  • Relative to peers, debt-EV rose 1.81 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
WH Smith PLC 1.68 0.89 69 483.08
Conviviality Plc 17.19 0.99 7.99 37.27
Findel plc 63.83 3 -0.19 -5.89
Laura Ashley Holdings plc 28.07 1.2 9.17 25.68
Marks and Spencer Group plc 31.16 0.69 6.19 40.04
Card Factory Plc 12.54 1.55 32 49.32
Peer Median 22.63 1.1 8.58 38.66
Best In Class 1.68 3 69 483.08

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Company Profile

Card Factory Plc operates as a holding company, specializes in retailing of greeting cards, gift dressings, and associated gift and party products. It operates through Card Factory and Getting Personal segments. The Card Factory segment retails cards and gifts in the United Kingdom through an extensive store network. The Getting Personal segment is an on-line retailer of personalized cards and gifts. The company was founded in 1997 and is headquartered in Wakefield, the United Kingdom.

Disclaimer

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