Is growth slowing at Aveva Group plc, Card Factory plc and Topps Tiles plc?

Shares in industrial software firm Aveva Group (LSE: AVV) fell by 5% this morning after the group reported a sharp fall in profits.

Aveva had a tough year last year, thanks to a combination of the oil market crash and currency headwinds. The group’s adjusted pre-tax profit fell by 18% to £51.2m, while profit margins fell from 29.8% to 25.4%.

Although shareholders were rewarded for their patience with a 20% increase in the final dividend, Aveva shares have now fallen by 23% over the last 12 months and by 6% so far in 2016. The group’s demanding valuation appears to be eroding, but is it time to top up and buy more?

Aveva remains a cash generative business. Net cash rose by 4% to £107.9m last year, despite falling profits. On the other hand, earnings per share are only expected to rise by 8% this year. Even after today’s falls, the group’s shares still trade on a forecast P/E of 21.8. This seems fairly demanding to me. I plan to watch for a little longer before considering a buy.

Empty high streets hit sales

Discount greetings card retailer Card Factory (LSE: CARD) saw sales growth slow during the first quarter. The news sent the firm’s shares down more than 4% this morning.

Card Factory blamed customers for staying away from the high street, but it’s also possible that the firm’s market share is reaching a natural limit. Total sales rose by 6.5% due to 20 new store openings during the period, but like-for-like growth was lower than in previous quarters.

The company says it’s still targeting like-for-like sales growth for the full year of between 1.4% and 3.2%. Consensus forecasts suggest earnings per share should rise by 7% to 19.9p this year, putting the stock on a forecast P/E of 18.3.

Card Factory generates a lot of cash and the dividend is expected to rise by 77% to 15.1p this year, giving a forecast yield of 4%. The company has promised further detail on cash returns with the interim results. I’m concerned that a slowing sales trend could affect dividend growth. In my view, there’s no rush to buy these shares at the current price.

A profitable play on housing?

Shares in Topps Tiles (LSE: TPT) rose by 3.4% this morning after the firm said that sales rose by 3.8% during the first half of the year.

Profits rose much faster, with adjusted pre-tax profit climbing by 13.5% to £10.3m. Tighter stock control appears to have helped. Another attraction is Topps’ impressive gross profit margin of 61.5%. Retailers with high margins can deliver strong profit growth from a small increase in sales.

Today’s figures leave Topps shares trading on a 2016 forecast P/E of around 15. The interim dividend has been hiked by 33% to 1p per share, suggesting that full-year forecasts for a payout of 3.36p per share are reasonable. This gives Topps a forecast yield of 2.5%.

Net debt has fallen steadily to just £28m. This isn’t a concern, in my view, as it’s less than twice the firm’s forecast full-year profits of £17m. Assuming the UK economy and housing market remain stable, I think Topps could deliver further gains for shareholders over the next one or two years.

However, I don't think that Topps Tiles is the best growth choice in the retail sector.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.