IG Design Group PLC (IGR) Expects Growth Momentum To Sustain
With a flawless balance sheet, Eversholt-based stationery products company IG Design Group Plc (LON:IGR) remains one of the high-quality small-cap stocks with a market capitalisation of less than £300 million. IGR shares are up more than 60% year-to-date with major gains coming after a blockbuster full-year results, as guided by the company in Mar’17. The highlights of the company’s performance during the financial year to Mar’17 included achieving targeted leverage two years before the schedule, impressive cash generation, record revenue of over £300 million and better than expected profits, driven by strong growth in the Americas, where it acquired The Lang Companies, a Wisconsin-based leading art and design-gift company operating for over 30 years. In the latest update after annual results, CEO Paul Fineman said, “we are pleased with the progress made in the first quarter, particularly with regard to the various incremental growth initiatives highlighted at the Group’s results”. IGR is benefitting from bringing its three UK businesses under one umbrella, synergies through Lang-acquisition in the Americas and the national roll-out of its greeting cards with the largest discounter in Australia. “Organic growth opportunities exist in all regions, and our strong balance sheet is also providing the flexibility to continue to evaluate M&A opportunities”, said Mr Fineman. “Alongside this, our order book is yet again at record levels with strong momentum fueled by excellent product innovation and ever closer relationships across our broad customer base”, he added. Compared to its industry’s PE at around 20, IGR currently trades at a rich valuation with a PE ratio of nearly 25 and while its PEG ratio of 0.7 indicates an acceptable valuation, when expecting it to deliver similar growth over three-to-five years — at present the company seems confident and is showing momentum to achieve the same. However, considering the stock trades at multi-year highs, margin of safety appears thin for value investors.