Star stock 4imprint surges 20%

This strong business had already caught the eye of our experts. That faith is being repaid today.

Investors scanning for potential buying opportunities in bombed-out markets were today taking a closer look at the branded mugs and corporate merchandise of highly-rated 4imprint (LSE:FOUR).

The US-based direct marketing business lost a fifth of its value at the end of February as coronavirus fears impacted stocks like 4imprint with sizeable China supply chains.

While the threat posed by a potential global pandemic remains acute, there was significant reassurance from 4imprint today after it said disruption so far had been minimal.

As most of its suppliers were already at peak inventory levels ahead of the Lunar New Year, it said reduced capacity seen in February and so far in March should not impact supplies. Around 60% of the blank stock produced prior to corporate branding originates from China.

The update, which appeared alongside impressive 2019 results, ensured the FTSE 250 index stock was one of the biggest beneficiaries from a flurry of buying interest in the London market today. As our Hold, Fold or Buy? survey highlights, a third of interactive investor customers are keen to take advantage of buying opportunities despite the coronavirus uncertainty.

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That was shown in the desire to snap up a company whose shares have never been cheap by historical standards — trading recently with a forward price/earnings multiple above 25x.

The shares bounced as much as 20% to 3,240p today as confidence was given a further boost by a 19% rise in underlying earnings per share to 154.41 cents and a chunky 25% jump in sterling dividend to 66.68p.

Source: TradingView Past performance is not a guide to future performance

The company also looks set to achieve its 2022 target for $1 billion in revenues a year early after growing the top line figure by 17% last year.

This continues 15 years of mid-teens revenues growth, an “enviable growth record” that prompted Peel Hunt to recently name 4imprint as one of its 35 growth stocks for 2020. They said a consistent strategy and highly fragmented market were key attractions.

Our own Lee Wild also went for 4imprint in December as one of his three speculative growth picks for this year, alongside Gamma Communications (LSE:GAMA) and Team17 Group (LSE:TM17).

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And despite the coronavirus threat, analysts at WH Ireland said today they continued to view 4imprint as a core holding, adding that the company had “enormous scope to grow market share in a very sizeable market”.

Its products range from basic giveaways such as pens, bags and drinkware to higher value items such as embroidered apparel, business gifts and full-size trade show displays. Technology is an increasingly popular category, with Bluetooth speakers, ear buds and other items fuelled by the use of mobile devices.

The vast majority of its business is generated in North America, with revenues last year up 17% or $124.7 million as the largest distributor of promotional products in the region. The Manchester-based UK division accounted for 2.5% of total sales last year.

The company said almost 300,000 new customers were acquired during 2019, while orders from existing customers improved 17% on the previous year.

WH Ireland added: “4imprint has driven growth in its business for over a decade from its sophisticated software and its ability to handle multiple customised orders and clients.

“New marketing techniques in the past two years are complementary to the strong data analytics and fundamental skill-sets.”

The company is highly cash generative, with a year-end cash balance of $41.1 million up 50% on a year earlier. Its last special dividend was in May 2018, when it paid 60 cents a share.