Edison Investment Research Limited
London, UK, 11 September 2020
Edison issues outlook on 4imprint Group (FOUR)
4imprint's first half trading was heavily affected by the commercial repercussions of the COVID-19 pandemic as it spread across the US. With uncertainty over the speed and extent of the reopening of the US economy, projections for the remainder of the year (and for FY21) are more tentative than usual. Despite the difficult trading circumstances, 4imprint retains a strong, cash positive balance sheet, and has low fixed costs and capital requirements. We believe that it retains its long-term attractions in a large, fragmented market and should rebuild quickly as the economy recovers.
With so much uncertainty regarding how and at what speed the US economy will continue to recover our earnings forecasts are tentative and valuation judgements based on them are subjective. 4imprint has a market-leading position, a low fixed cost base and limited capital requirements, attractive cash flow characteristics and a cash positive balance sheet, all of which justify its premium rating. 4imprint trades on an FY19 EV/EBITDA of 12.0x, compared to marketing services stocks on 7.2x
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