The gift and celebration packaging company has just kicked off a turnaround strategy that’s started yielding some positive results. This has helped repark some fresh investor sentiment, sending the share price up more than 40% in the last month alone, with a 34% gain in a single day at the end of May.

Despite this surge, the IG Design share price is still trading significantly lower compared to a year ago. That means there’s still a long way to go for the business to complete its recovery. Yet, if analyst forecasts are correct, that could soon change.

Bullish forecast

A big part of renewed investor sentiment is management’s decision to exit DG America’s business. Despite generating close to $500m in revenue, the segment has struggled to deliver a profit. And with US tariffs only adding more pressure, leadership concluded that the “headwinds facing the division are untenable”.

The decision to dispose of problematic DG America was met with praise from investors. Why? Because the company’s now significantly reduced its exposure to the weaker US retail market environment that it’s struggled to navigate. At the same time, IG Design has just freed up a lot more capital to reinvest in stronger areas, refocusing the business into more profitable ventures.

Subsequently, profit margins and free cash flow generation are expected to rise. And institutional analysts have revised their earnings per share forecasts for 2026 to reach $0.43 versus the $0.16 achieved in 2024 – a 170% improvement.

Obviously, there’s no guarantee that this target will be hit since we’re still in the early stages of its turnaround plan. But if it does get things back on track, the team at Research Tree think the penny stock could skyrocket by 120% to 198p by this time next year!

What could go wrong?

No investment’s ever risk-free, and that’s especially true for IG Design Group. Despite being the source of many of its problems, DG America was also responsible for around half of its revenue stream. The company’s now dependent predominantly on the UK, European, and Australian markets, which have their own fair share of challenges.

A big source of renewed investor sentiment is IG Design’s ability to rebuild its scale at a higher margin in these markets. But a failure of execution could douse the flames of optimism and send the penny stock tumbling back down in the wrong direction.

Even if management makes all the right moves, there’s still the consumer spending cycle that can throw a spanner in the works. IG Design’s product portfolio consists entirely of discretionary items which aren’t likely to be in high demand if economic conditions take a turn for the worse – something that’s completely out of management’s control.

All things considered, I’m cautiously optimistic and think investors comfortable with high-risk, high-reward ventures may want to consider taking a closer look.

The post Is this penny stock on track for an explosive recovery in 2025? appeared first on The Motley Fool UK.

Right now, the London Stock Exchange is home to a wide range of tiny enterprises. But one that’s caught my attention this week is IG Design Group (LSE:IGR).

At a market-cap of £86m and a share price of around 88p, the celebration and gift packaging enterprise sits firmly within penny stock territory. But if analyst projections are right, that may soon no longer be the case.

What happened to IG Design Group?

IG Design Group wasn’t always a penny stock. A quick glance at its historical share price chart shows that its shares used to trade near the 600p mark, even reaching as high as 800p in early 2020. So what happened?

There were a lot of factors at play. However, in short, the problem boiled down to weak consumer spending, particularly in America. Being a seller of celebration-related products, the business is highly cyclical and linked to discretionary consumer spending. But, following the emergence of inflation, consumer wallets started to get a little tighter, resulting in lower demand for IG Design’s product portfolio.

What followed was a series of profit warnings that spooked investors, causing the company to tumble into penny stock territory. And the threat of US tariffs driving up input costs only added more fuel to the fire.

 But if that’s the case, why are institutional analysts now bullish? After all, Research Tree’s placed a 198p share price target on the business. Meanwhile, Panmure Liberum’s even more bullish, projecting the stock could reach 295p within the next 12 months – a 235% potential gain!

A potential comeback story

With underwhelming performance materialising in recent years, management’s attempting to get the business back on track. And as part of that plan, IG Design’s undergoing quite a bit of a restructure.

The company has closed underperforming sites and shifted its product portfolio to focus on fewer, higher-margin products. At the same time, new senior leadership has been brought in across its finance and logistics departments.

This turnaround strategy obviously comes with execution risk. Don’t forget that restructurings can cause a lot of short-term chaos, even when the right decisions are made. But in the medium term, management believes it can get profit margins back on track at 4.5% or more compared to the current 1.8%.

At the same time, free cash flow is expected to meaningfully return to the black while also making operations leaner and more agile. And if the firm can hit these goals, then the optimistic outlook from Panmure Liberum makes a lot of sense.

With that in mind, value investors who don’t mind a bit of volatility may want to consider taking a closer look at this unloved enterprise.

The post 235% forecast return! Is this penny stock about to make investors richer? appeared first on The Motley Fool UK.

By comparison, the average length of a bear market during this time was 1.7 years, with an average loss of 36.5%.

You won’t need us to spell out, then, that long-term investing has proven to be one of the most lucrative methods of growing wealth over the past century!

And small-cap stocks — while riskier investments than their larger peers — have some of the biggest runways to future growth during bull markets.

So without further ado, here are a few candidates that some of our contract writers are bullish on!

Agronomics

What it does: the company invests in early-stage growth firms in the cellular agriculture sector.

By Jon Smith. Agronomics (LSE:ANIC) is a very unique company with regards to being involved in cellular agriculture. Cellular agriculture is the production of agriculture products directly from cell cultures that would have otherwise been derived from traditional agriculture methods.

The portfolio is growing, including shareholdings in firms such as BlueNalu that makes cell-cultured seafood (meaning that no fish are killed in the process). BlueNalu raised $33.5m in funding in October.

It has 22 firms in the portfolio, many of which I expect to do well in the next bull market.

Investing in Agronomics stock allows me to get diversified exposure to this growth market. The main risk here is that the sector as a whole disappoints, or that the companies simply don’t get off the ground. Yet if just one of these businesses hits it big, the Agronomics share price could skyrocket.

Jon Smith does not own shares in Agronomics

Bioventix

What it does: A specialist manufacturer of sheep monoclonal antibodies used for human blood testing worldwide.

By Zaven Boyrazian. Bioventix (LSE:BVXP) is a pretty niche biotech enterprise specialising in sheep monoclonal antibodies (SMAs). Without going too far into the weeds, SMAs are used throughout a wide range of blood tests worldwide. And since demand for such tests hasn’t decreased, the firm is reporting solid growth while many of its peers have seen their financial performance go in the wrong direction.

While the sale of SMAs lies at the heart of the group’s business model, the bulk of revenue actually stems from license royalties from any diagnostic tests that make it to market using the group’s antibodies.

As such, most of the income being generated right now actually comes from contacts secured years ago. And with a new contract supply signed with Seimens, among others, demand looks like it’s ramping up despite cheaper alternatives from competitors. While the threat of rivals can’t be ignored, they appear to be struggling to disrupt Bioventix from its leading position.

Zaven Boyrazian does not own shares in Bioventix or Seimens.

Central Asia Metals

What it does: Central Asia Metals is an AIM-listed producer of copper cathode, lead and zinc.

By Paul Summers. It makes sense that a lot of mining stocks have proved unpopular in 2023. Base metals prices tend to fall when economies are struggling.

Since we can be pretty sure that a bull market will eventually kick in, however, I think this could be a great time to go hunting in the sector. My pick is Central Asia Metals (LSE: CAML). 

While down nearly 40% in value year-to-date, the small-cap’s low-cost operations should mean it can withstand this period of market malaise. Positively, the company announced in October that it was on target to achieve its full-year guidance on production.

Central Asia Metals also boasts a strong balance sheet and a mighty 9.3% forecast dividend yield. 

Analysts are predicting massive supply deficits in the years ahead. With the shares trading at just seven times earnings, I reckon this could be an excellent contrarian buy. 

Paul Summers has no position in Central Asia Metals

IG Design

What it does: the company designs and makes celebration, stationary, creative play, gifting and not-for-resale consumable products. 

By Kevin Godbold. IG Design’s (LSE:IGR) business is sensitive to general economic shocks and earnings collapsed along with the share price in the trading years to March 2022 and 2023. But economic times could be on the mend for consumers. And City analysts predict a massive earnings rebound ahead. 

Estimates I’ve seen anticipate a return to pre-Covid profits as early as the next trading year to March 2025. Meanwhile, the share price languishes around 148p as I write compared to a peak above 760p pre-pandemic. 

Meanwhile, the valuation looks undemanding with a forward-looking earnings multiple of just under five when set against expectations. And in October, the company issued an encouraging trading statement.  

This is a racy choice with plenty of cyclical risk. Earnings could easily decline again if economic conditions remain tough. Nevertheless, the stock has the potential to soar in the next bull market if profits gain traction in the months ahead. 

Kevin Godbold does not own shares in IG Design. 

Yü Group 

What it does: Yü Group supplies gas, electricity and water to small and medium-sized businesses (SMEs) across the UK.  

By Harshil Patel. After several high-profile energy suppliers have gone bust in recent years, it might seem strange why I think this one is set to rocket in the next bull market.  

But there’s a key difference. Rather than supplying households, Yü Group (LSE:YU.) focuses on businesses. Its Digital by Default strategy offers them a quick and easy way to sign up and monitor their usage and bills.  

Most SMEs have tended to stick with one of the “Big Six” suppliers. But with soaring energy costs in recent years there is an opportunity for Yü to take market share. 

The tech-focused strategy has already started to reap rewards. Sales and profits in the first half of 2023 jumped by 51% and 62% respectively. But I reckon there’s more growth to come.  

Bear in mind that Yü isn’t risk-free. It relies on being able to hedge its energy exposure using a wholesale energy market counterparty. Any breach or removal of this agreement could have a material impact. 

Harshil Patel does not own shares in Yü Group. 

The post 5 small-cap stocks Fools think will soar in the next bull market appeared first on The Motley Fool UK.

There are many cheap shares around now because of recent geopolitical and economic events. And last year’s weak stock market created several attractive-looking investment opportunities for my Stocks and Shares ISA.

One I’m keen on is IG Design (LSE: IGR). The company describes itself as a “leading” manufacturer of gift packaging and products for celebrations, gifting, stationery and creative play.

International operations

In the trading year to March 2022, around 69% of revenue came from the Americas and 12% from the UK. The remaining turnover came from other countries in the world. So IG Design has a well-developed international business with an emphasis on America.

But as we might expect, operations have a lot of cyclicality. And that’s caused problems along with the well-reported general supply chain difficulties.

I last wrote about the firm in November 2019. Back then, the business was riding high and growing like mad. And I reported the share price at 639p. But today, it’s in the ballpark of 153p. So what went wrong? 

The answer to that question is earnings. The pandemic and the other economic challenges caused the firm’s profits to drop away. And the share price plunged as well. Since its peak in January 2020, the stock is now around 78% lower. Therefore, it’s cheap in that sense.

But the business is turning itself around. And the shares have been responding well. For example, over the past year, the stock has risen by just over 40%. But the enterprise has the potential to perform well in the coming years and to rebuild its earnings. 

The business is turning

Last November’s half-year results were encouraging. Revenue for the six months to 30 September increased 8% year on year. And there was “improved profits and margin recovery”. The directors said they expected the full-year results to be “ahead of expectations”.

City analysts have pencilled in a big earnings recovery of around 580% for the trading year to March 2024. But even if that happens, earnings will still only be around a quarter of those achieved in the year to March 2019.

Meanwhile, the forward-looking earnings multiple set against that estimate is around 15. And that valuation strikes me as fair rather than cheap. However, if IGR can rebuild its earnings to somewhere near prior levels, the valuation today could prove to be cheap. But positive outcomes aren’t guaranteed. So I’d suggest this stock is not for widows and orphans, despite the potential of the business to recover and grow.

But new chief executive Paul Bal is due to take up his position on 1 April. And he’s been the chief financial officer (CFO) since March 2022. But prior to that he served as CFO at Stock Spirits where he “was instrumental in the turnaround of the then LSE-listed group”.

However, even with a refreshed management team in place, positive outcomes are not certain. And one thing for investors to keep an eye on is the big load of debt carried by the company. 

Nevertheless, I’m optimistic about the multiyear prospects for IG Design. And although I already hold some of the shares, I’m thinking about adding more to my Stocks and Shares ISA.

The post 1 cheap share I’d buy now in my Stocks and Shares ISA appeared first on The Motley Fool UK.

Celebrate good times

As a quick introduction, IG Design Group designs, manufactures, and distributes a range of products for consumers to help to celebrate special occasions. These include greetings cards, gifts, not-for-resale consumables, as well as stationery.

So what’s the current state of play with IG shares? Well, as I write, the shares are trading for 85p. At this time last year, they were trading for 550p, which is a 85% drop over a 12-month period.

Looking deeper into the reason for such a fall, IG shares have tumbled due to macroeconomic pressures (which I will go into more detail about later). Many UK shares have suffered a similar fate due to soaring inflation, the rising cost of raw materials, and a global supply chain crisis that has impacted performance and returns.

To buy or not to buy

So what are the pros and cons of me buying IG shares?

FOR: Reviewing IG’s performance track record, I do understand that past performance is not a guarantee of future performance. However, it makes for positive reading. I can see that revenue and profit have grown year on year for the past four years. Coming up to date, IG released FY results for the period ending 31 March 2022 today. These results were a mixed bag. Revenue increased by 11% compared to 2021 results and IG paid a dividend of 1.7 cents. Unfortunately, margins were squeezed and profit levels dropped substantially along with net cash reserves.

AGAINST: I believe profit margins dropped due to the macroeconomic factors at play. Materials are costing more, when businesses can get hold of them due to supply chain issues, which means the manufacturing process and sales figures are affected. There is no light at the end of the tunnel regarding these issues, which is off-putting for me as a potential investor.

FOR: Economic struggles don’t last forever and no one has a crystal ball to tell when these issues may ease. If they do, and IG can return to previous profitability and growth, the shares could be a shrewd acquisition right now. On a price-to-earnings ratio of just nine, the shares look decent value for money. My investment strategy of buy and hold for the long term would come into play here. Furthermore, the shares pay a dividend, which would boost my passive income stream. It is worth remembering that dividends can be cancelled at any time, of course.

AGAINST: The current cost-of-living crisis could affect demand for what some may deem as luxury items that IG Design Group sells. Consumers will prioritise food, energy, and other essential goods over such products. This could affect IG’s performance and any future returns.

Better UK shares out there

I would not currently add IG Design Group shares to my holdings. Despite the positives noted above, the negatives outweigh these for me personally. Nobody knows when the macroeconomic issues contributing towards the cost-of-living crisis may subside. These have had a real impact on IG’s investment viability for me.

For that reason I am looking at other stocks to boost my portfolio and provide me with better, stable returns.

The post UK shares: 1 dirt-cheap dividend paying growth stock I’m considering! appeared first on The Motley Fool UK.

The IG Design share price vs supply chains

Despite what the movement of the share price would indicate, sales have continued to climb. In fact, the revenue for the first half of its latest fiscal year from March increased by 11% versus the 5% achieved in 2019. Moreover, management predicted that this growth will climb even higher over the next six months and well into its 2023 fiscal year.

Usually, this would be good news for the IG Design share price. But unfortunately, Covid-19 has other plans. The pandemic may be slowly coming to an end. However, it continues to wreak havoc on global supply chains. This disruption has significantly increased sea freight, materials, and labour costs for the business.

Consequently, operating margins during the last three months have been adversely affected. And this external problem is expected to continue well into next year. Currently, it’s unknown exactly how severe the impact will be. But management has stated that full-year operating margins could fall by 1.75%-2.25%. Given that margins for its 2021 fiscal year came in at 2.3%, this forecast indicates that profits may be about to evaporate.

With that in mind, the collapse of the share price is understandably being triggered by investors jumping ship.

The post Why did the IG Design (LON:IGR) share price crash 30% today? appeared first on The Motley Fool UK.

There are two ways I can interpret this. One, that this is a market aberration that will iron itself out. It could even be a sell-off in shares after its share price rose 2% on the day of the results release. Two, that something in the results’ fine print is spooking investors. So what has actually happened?

Robust growth

IG Design’s revenues grew by a whole 40% for the full year ending March 31, compared to the year before. Reported numbers saw it swinging to a pre-tax profit of $14.7m from a small loss during the year before. Its reporting currency has also switched to dollars following the acquisition of CSS Industries last year. 

There are more reasons to be bullish on IG Design shares too. One of them is that even in an otherwise difficult year for manufacturers of non-essential products, it grew across all its categories. 

Its biggest segment, celebrations, which covers products like greetings cards, wrapping paper and crackers, grew by 11%. There was also a significant uptick in the craft and creative play segment as demand for at-home entertainment took off during the lockdown. 

Fortunate acquisition for the AIM stock

Besides some genuine demand increase, IG Design’s numbers have also been bumped up by its acquisition of US-based CSS industries. If the acquisition had not been made, the company’s revenues would have shrunk by 5% during the year.  In other words, I think it got lucky with the acquisition and its timing, which was just before the pandemic. But I do not want to take away from the fact that it was probably a very good strategic decision as well.

Pandemic and prices could play spoilsport

It is also quite positive about its future, but I am still cautious for companies that cater to non-essential spending. There has been a lot of government support to keep the economy going so far. But if the pandemic continues, I am not sure how long this can carry on. And non-essential spend will be the first to be hit. 

Also, it has mentioned inflation as a concern for 2022. While raw material and freight costs have risen for it already, the company said that so far, they have had limited impact. There is near consensus on rising prices across companies I have looked at recently. 

My takeaway for the IG Design share price

However, there are differing views on whether inflation will continue to rise. If it does not, IG design’s challenge will go away on its own. If it does, the company sounds confident of its ability to manage it. Also, there is a higher chance that the risk of a pandemic return is lower now. 

I think AIM stock is definitely one to consider, I do not see anything in the fine print that would worry me. 

The post Is this AIM stock a screaming buy for me after its robust results? appeared first on The Motley Fool UK.

Rather than blowing money on presents people don’t want or need, I said that these two growth stocks could be the best use for your Christmas money. I’m putting my reputation on the line here, by checking up on my own predictions. So should you be thankful for my Christmas gift?

IG Design Group

Greetings card and gift wrapping company IG Design Group (LSE: IGR) caught my eye after growing an incredible 850% over five years, while defying the retail slowdown afflicting the UK high street.

It helped that this is a global company, whose products now retail in more than 200,000 stores across 80 countries. Around 60% of its revenues come from the US and just over 20% from the UK, with the remainder split between Europe and Australia.

Since I tipped the AIM-listed stock in December last year, its share price has climbed another 23%, I was happy to discover.

Its latest results show a company that is still growing nicely, with reported revenue up 21% to £248.4m in the six months to 30 September, driven by organic growth and the £56.5m acquisition of Minnesota-based Impact Innovations. Better still, net debt fell 14% to around £86m, while the interim dividend per share increased 20% to 3p.

The IG Design Group share price’s rapid growth means the stock is relatively expensive, trading at 20.8 times forward earnings. However, it isn’t that expensive, given that City analysts are forecasting earnings growth of 98% in the year to 31 March 2020, followed by 8% the year after.

The company has also built strong, long-term relationships with retailers, which should help if we have bumpy times ahead. I would be happy to keep this in my portfolio in 2020 and beyond.

International Consolidated Airlines Group

My other Christmas stock tip was International Consolidated Airlines Group (LSE: IAG), owner of British Airways, Iberia, Aer Lingus and budget airlines Level and Vueling. I recommended it despite a bumpy 2018, when the share price was hit by Brexit, crew and air traffic control disputes, and a UK competition authority investigation into its revenue-sharing agreement with Finnair and American Airlines.

I was drawn by its incredibly low valuation of just 5.9 times forward earnings and 3.9% forecast yield, covered 4.3 times by earnings.

One year later, the €12.88bn FTSE 100 stock is down 7%, so no glory for me here. Continued strike threats knocked investor sentiment, while the group was also hit with a £183m fine following the hacking of its website.

However, it has recovered smartly from a summer slump, and is up 27% in the last three months, helped by the collapse of rival Thomas Cook. 

The IAG share price is still incredibly cheap, trading at five times forward earnings, while yielding 4.5%, with healthy cover of 3.75 times earnings.

The airline industry is tough, especially for established players, due to relentless price pressure, while factors such as terror attacks and fuel costs are beyond management control. This remains a hugely profitable company and it is certainly on the right track at the moment. I would still buy it.

The post £2k to invest? I’m tipping these stocks to outperform in 2020 appeared first on The Motley Fool UK.

Instead, I’d rather invest in companies trading well with a growth strategy that’s working, such as IG Design (LSE: IGR). The firm designs, manufactures, sources and distributes products for celebrations, gifting, stationery and creative play, and it’s been doing very well indeed!

Good trading

There’s an impressive multi-year record of rising revenue, earnings and shareholder dividend payments. And since the beginning of 2015, the share price has risen more than 780%. But with the market capitalisation today just above £500m, I reckon there’s plenty of scope for the company to further expand its international operations.

Today’s half-year results report reveals to us that in the six months to 30 September, around 60% of revenue came from the USA, 22% from the UK, 11% from Europe and the remaining 7% from Australia. Operations are truly global but there’s no denying the market in America is important. My guess is that culture across the pond is receptive to the company’s product output.

I like the business model. The company says it serves “the best” retailers around the world with a “complete” end-to-end service from design to distribution. The customer list includes some of the biggest supermarket, high street, fashion and online retailers globally. As such, IG is insulated from the operational challenges faced by its retail customers. It doesn’t really matter whether a retail customer business is an old established chain or an up-and-coming competitor. IG Design can supply them all.  

The figures in today’s report look strong. Revenue rose 21% compared to the equivalent period the year before, adjusted operating profit elevated 21% and adjusted earnings per share lifted 2%. Net debt came in down almost 14% at just over £86m. Trading has been robust and the directors pushed up the interim dividend by 20%, which I reckon signals confidence in the outlook.

Growth on the agenda

Chief executive Paul Fineman said in the report the firm has a “strong foundation” to meet its “ambitious” growth targets. He’s expecting organic progress driven by the “strong” sales pipeline and also expects growth via acquisition activity.  

I reckon IG Design serves a profitable niche in the market and has built up some long-standing relationships with many retail chains. We can see the success of the strategy in the firm’s trading record. However, as with many established growth opportunities, the firm’s success has not gone unnoticed by the investment community.

With the share price close to 639p, the forward-looking earnings multiple for the trading year to March 2021 is just over 18, and the anticipated dividend yield is a little under 1.9%. That’s not a bargain valuation, but I reckon the growth story could have much further to run.

The post Forget Royal Mail and Sirius Minerals! I’d buy this strong stock instead appeared first on The Motley Fool UK.

Festive getaway

People aren’t just driving home for Christmas they are also flying and FTSE 100-listed International Consolidated Airlines Group (LSE: IAG) should reap the benefit. IAG owns British Airways, Iberia, Aer Lingus and budget airlines Level and Vueling, and will benefit from people jetting home to be with family at Christmas (or flying away from them).

The £12.2bn company has had a bumpy year, with the share price around 3% lower than 12 months ago as it has been caught up in Brexit turbulence, as well as crew and air traffic control disputes. The UK competition authority has launched an investigation into the 10-year revenue-sharing joint venture agreement with Finnair and American Airlines, which hasn’t helped. 

High flyer

Chief executive Willie Walsh recently reported a positive third-quarter performance with a small increase in operating profits before exceptional items from €1.45bn to €1.46bn year-on-year, “despite significant fuel cost and foreign exchange headwinds”. With oil falling to around $60 a barrel, fuel costs are now turning into tailwinds.

IAG is currently valued at just 5.9 times forecast earnings and looks cheap enough to buy, with Walsh setting out plans to increase target underlying operating profits to €7.2bn a year for 2018-22, up from €6.5bn. Plus you get a decent forecast yield of 3.9%, and cover of 4.3. The biggest danger is that a UK and European slowdown could hit traffic.

All wrapped up

This is the most wonderful time of year for greetings card and gift wrapping company IG Design Group (LSE: IGR). This AIM-listed £450m company has a large global reach, with operations in the Americas, Europe and Australia. Its products now retail in more than 200,000 stores across 80 countries and it is expanding through acquisition.

It has also been one of the most exciting stocks of the last five years, up an incredible 850% over that time, yet hasn’t attracted the investor excitement you might expect given its soaraway growth. I wrote about this small-cap 12-bagger earlier this year, noting that it has even managed to defy the retail slowdown affecting bricks and mortar retailers on the stricken UK high street. 

Christmas on the cards

The group recently announced a reported 23% rise in revenue to £205m, driven by organic growth of 4% and the acquisition of Impact Innovations Inc in the US, while underlying profit before tax jumped an impressive 76% to £18.5m.

Unsurprisingly it isn’t cheap, currently trading at 21.6 times forward earnings, but it isn’t that expensive given such strong growth, with earnings forecast to rise 13% and 17% over the next two years. You even get a small yield, currently a forecast 1.5%, with cover of 1.3x, but this stock is all about the growth. I’m hoping IAG and IG will both shine at Christmas, and for years to come.

The post These 2 growth stocks could be the best use for your Christmas spending money appeared first on The Motley Fool UK.