Card Factory (LON:CARD) — mrkt cap £323mm; Price £0.94; EV/EBITDA 3.6
MORE RESEARCH NEEDED. A UK vertically integrated specialist retailer of greeting cards, gifts, and celebration essentials. The business struggled post-COVID as they shut down their 1,000-store retail footprint and the sale of greeting cards moved to grocery stores. Since then, the company has slowly regained its footing, with revenue growing steadily since FY ’21. The market doesn’t think too highly of the retail greeting card business, probably due to online competition, e-cards, or a general belief that fewer people are buying greeting cards. We have a few reasons to disagree but still have research to do on the industry. Additionally, more research needs to be done on CARD’s growth drivers. But so far, we like what we see.
PubMatic (NAS:PUBM) — mrkt cap $1.1B; Price $23.0; EV/EBITDA 23
MORE RESEARCH NEEDED. PubMatic runs an online marketplace that connects digital content creators with advertisers. They make it convenient for buyers (advertisers) to review ad space supplied by publishers and then have a bidding structure in place that allows for purchase. They generate a large portion of their revenue not only by selling ad space to advertisers but also by selling this ad space to other platforms. The digital ad space is complex and seems to be in a state of constant evolution. We have previously discussed how media fragmentation is an underfollowed megatrend. CMOs are struggling with complexity such as where to advertise (Google, Meta, OTT, Linear TV, etc.). PUBM is solving some of these problems by selling ad space on a variety of formats, including streamed content. The valuation does seem rich but perhaps the business model and market opportunity warrant it. Still more digging to do.
Graftech (NYSE:EAF) — mrkt cap $480mm; Price $1.87; EV/EBITDA NA
PASS. We first wrote about EAF in September of last year. More research was needed to determine how their business was evolving with EV demand. Since then, it has fallen by more than 50%. To recap, EAF is a vertically integrated manufacturer of graphite electrodes. These are used in electric arc furnaces (EAF) to produce steel. Potential green shoots for them involved converting their needle coke into anodes for EV batteries. However, there has been no headway here (with prospects likely years away) and supply from India and China will continue to keep prices depressed in the electrode segment. Coupled with their high margin long-term agreements expiring this year, EAF is in for a tougher time ahead.