Interactive Investor

Metro Bank, Card Factory, TI Fluids: which one is a ‘top buy’?

3rd May 2023 15:36

by Graeme Evans from interactive investor

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It’s results day for these three popular stocks and they’ve each gone their separate ways. Here’s how investors reacted and what the experts say.

A trio of shares 600

Top-performing Card Factory (LSE:CARD) shares today finally ran out of steam in a session when the mid-cap spotlight was also on TI Fluid Systems (LSE:TIFS) and profitable Metro Bank (LSE:MTRO).

Card Factory succumbed to a bout of results-day profit taking, having more than doubled in value on the back of three upgrades to City guidance since November.

Revenues rose 27.1% to £463.4 million and annual earnings per share jumped 437% to 12.9p a share, with trading in the first few weeks of the new financial year seen as “encouraging” and slightly ahead of the board's expectations.

The company followed the results presentation with a full strategy briefing, where it set out plans to invest £24 million a year in a bid to deliver targeted revenues of £650 million by 2027 and an improved profit margin of about 14%. It added: “The board remains confident in the compelling growth opportunity for the business.”

Despite the recent turnaround for shares, Liberum believes they remain cheap on a price/earnings multiple of 11.2 times. The broker describes the company as one of its “top buys” with an unchanged target price of 150p compared with 103p this afternoon.

It points to Card Factory’s market-leading value proposition and resilience of its needs-based product offer, adding that the group has more than halved its net debt since 2020.

Liberum said: “Now on a firm footing with a strengthened management team, momentum should continue to build as the growth strategy transitions Card Factory from a store-based card retailer into a leading, omni-channel retailer of cards.”

TI Fluid Systems delivered the stand-out performance in the FTSE 250 index, after the supplier of automotive fluid storage and thermal management systems reported a 15.2% jump in first-quarter revenues to a better-than-expected 869.8 million euros (£767.5 million).

Its outperformance has benefited from ramp-up volumes on new thermal programmes for hybrid electric vehicles as well as battery electric vehicles, particularly in China.

Chief executive Hans Dieltjens called it a promising start to 2023, including good progress on inflationary recoveries. Shares jumped 14p to 122p but remain 10% lower in the year to date.

Peel Hunt, which has a target price of 185p, said the “encouraging and robust” update echoed the broader positive signs coming out of the sector.

The broker added: “The stock’s performance has put it on trough multiples when delivering trough earnings. Today’s update highlights improving momentum which coupled with ongoing execution makes our target price of 185p realistic.”

Meanwhile, more signs of turnaround progress at Metro Bank today helped its shares get back on the front foot after their recovery stalled in the banking turmoil.

The FTSE All-Share doubled in value between October and March, only for recent selling across the sector to leave the challenger bank back where it was in December.

Metro lifted 2.5p to 99.9p today after chief executive Daniel Frumkin reported a second consecutive quarter of underlying profitability, and said March had been the strongest performing month since the turnaround strategy began more than two years ago.

Metro said it opened over 54,000 personal current accounts and 12,000 business current accounts in the quarter, representing overall 18% growth on a year earlier. Retail mortgage lending increased marginally to £7.7 billion, offset by the managed reductions in both consumer lending to £1.4 billion and commercial lending to £3.9 billion.

Metro soared in value after its 2016 listing, hitting 4,000p at one point in 2018 as its branch-led model and focus on customer service shook up the banking sector. But the shares slumped in 2019 after an accounting issue saw it wrongly class certain loans.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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