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Checking up on the financial health of Card Factory

Jack Brumby

In investing, knowing which numbers you should pay attention to and which you should discard is half the battle. Honing in on the measures that tell us what’s really going on can save us a lot of time and pain. It also allows us to move faster than the competition.

At Stockopedia, we strive to identify these key measures. One of the most useful we have found so far is Piotroski’s F-Score - and the F-Score has good news for shareholders of small cap contrarian Card Factory (LON:CARD), which is a specialist retailer of greeting cards, dressings and gifts.

Card Factory has had a rough time of late. For the six months ended 31 July 2019, Card Factory PLC revenues increased 6% to £195.6M and net income decreased 14% to £19.5M, due in part to an increase in operating expenses of 6% to £42.4M, and rising interest on bank loans and overdrafts to £1.9M. In light of these results, the group opted to maintain its dividend at 3p per share.

It's not all bad news for Card Factory, however.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:CARD »

Card Factory's F-Score: what does it mean?

What's good about the F-Score is that it is essentially an entire quality and fundamental momentum screen in a single number, succinctly summing up the financial health trend of a company. Applying it as a filter on top of almost any strategy can help to increase returns and reduce risk.

Card Factory scores 8 out of a possible 9. In his landmark academic paper "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers", Piotroksi showed that by investing in companies scoring 8 or 9 by these measures over a 20-year test period through to 1996, investor returns could be increased by an astounding 7.5% each year. Below, you can see exactly how LON:CARD stacks up against the checklist.

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Find more high-quality stocks

This F-Score suggests Card Factory is a promising investment candidate and is worthy of further research - but it is only a first step. Higher F-Score stocks often trade at a premium compared to other stocks. Investors like to pay up for quality but it's important not to pay too much. We suggest checking the various value factor measures for Card Factory on the group's StockReport.

For years, the Stockopedia team have been poring over studies to see what works in investing. That's how we found the F-Score, but that's not all we've found... So take a two-week free trial today to see how Stockopedia can help you to build a better portfolio.