FTSE 250 incumbent 4Imprint Group (LSE: FOUR) has seen its shares spike today. Let’s take a look at what’s happened, and see if there’s an opportunity for me to snap up some shares.
Profits soar pushing up the shares
4Imprint is a direct marketing firm with a focus on promotional products such as personalised clothing, pens, mugs, and more. It operates in the UK, Ireland, and North America.
Over a 12-month period, the shares are up 19%, from 4,311p at this time last year, to current levels of 5,170p. Since today’s trading announcement, the shares have risen by as much as 11% throughout the day of trading.
A final results notice for the year ended 30 December 2023 indicated revenue and profit are to increase by 16% and 35% respectively. A hugely impressive rise, if you ask me, especially in the face of current headwinds and challenges. The full results are due in March, which I’ll be watching out for.
The investment case
Starting with the bull case, 4Imprint’s excellent track record of performance, historically, and recently, is very impressive. It has consistently grown, and even shown admirable resilience in the face of tough periods. A prime example of this being the pandemic. However, I’m conscious that past performance is never a guarantee of the future.
Next, 4Imprint’s excellent run has led to the business being able to reward investors. A dividend yield of 6% is attractive, and looks well covered by earnings too. This was another point highlighted in today’s update, as the firm pointed to excellent cash generation and reserves. However, I’m conscious dividends are never guaranteed.
Finally, 4Imprint shares are trading on a price-to-earnings ratio of 19. This could be viewed as a bearish aspect, as they’re trading for a premium and if performance were to dip, the shares could tumble. However, for me, they still look decent value for money as sometimes I believe you must pay a fair price for a quality stock.
Another risk I’d like to keep an eye on is continued macroeconomic volatility. Rising costs could take a bite out of profit margins but the recent update doesn’t show any ill-effects. However, sustained volatility could hamper it later down the line. Plus, demand for marketing and promotional products could dwindle with ongoing economic turbulence too. 4Imprint itself referenced this in an earlier trading update last year so it is aware of potential drawbacks.
My verdict
4Imprint’s trading update today – albeit limited and with more detail to follow – was excellent, so it wasn’t a surprise for me to see its shares jump upwards.
The investment case for me buying some shares is also pretty solid, with a great track record supporting it, as well as a passive income opportunity. My only wish is I wished I had bought some shares for my holdings much sooner!
As soon as I have some investable cash, I’ll be adding 4Imprint shares to my holdings.
