Very material upside - Card Factory
There is ‘very material upside’ at Card Factory (CARD) following a bounce back to profitability, says Liberum.
Analyst Adam Tomlinson retained his ‘buy’ recommendation and target price of 110p on the stock, which slipped 1.3% to close at 44.8p on Tuesday.
‘Card Factory has achieved a strong move back to profitability in the first half, driven by an encouraging stores performance, that reaffirms our confidence in its post-Covid-19 recovery,’ he said.
The group’s more than £30m of underlying free cashflow ‘reminds us that this remains a high-quality business’, added Tomlinson.
‘The rebuilding of profits, much improved balance sheet, and strong ongoing cashflow potential, means the group can increasingly focus on its transformation strategy,’ he said.
‘The plan of driving growth through improved store merchandising, a better online offer and more capital light retail partnerships makes a lot of sense.’
The shares, however, only trade on a 2022 price-to-earnings ratio of 7x falling to 5x in 2023, which implies a 20% yield. Accordingly, Tomlinson said ‘the upside from here is very material’.