IG Design Group (LSE:IGR) shares look good value for money, the company’s growth prospects look positive, and the shares pay a dividend. Let’s drill down into some details to learn more.
Celebrate good times
As a quick introduction, IG Design Group designs, manufactures, and distributes a range of products for consumers to help to celebrate special occasions. These include greetings cards, gifts, not-for-resale consumables, as well as stationery.
So what’s the current state of play with IG shares? Well, as I write, the shares are trading for 85p. At this time last year, they were trading for 550p, which is a 85% drop over a 12-month period.
Looking deeper into the reason for such a fall, IG shares have tumbled due to macroeconomic pressures (which I will go into more detail about later). Many UK shares have suffered a similar fate due to soaring inflation, the rising cost of raw materials, and a global supply chain crisis that has impacted performance and returns.
To buy or not to buy
So what are the pros and cons of me buying IG shares?
FOR: Reviewing IG’s performance track record, I do understand that past performance is not a guarantee of future performance. However, it makes for positive reading. I can see that revenue and profit have grown year on year for the past four years. Coming up to date, IG released FY results for the period ending 31 March 2022 today. These results were a mixed bag. Revenue increased by 11% compared to 2021 results and IG paid a dividend of 1.7 cents. Unfortunately, margins were squeezed and profit levels dropped substantially along with net cash reserves.
AGAINST: I believe profit margins dropped due to the macroeconomic factors at play. Materials are costing more, when businesses can get hold of them due to supply chain issues, which means the manufacturing process and sales figures are affected. There is no light at the end of the tunnel regarding these issues, which is off-putting for me as a potential investor.
FOR: Economic struggles don’t last forever and no one has a crystal ball to tell when these issues may ease. If they do, and IG can return to previous profitability and growth, the shares could be a shrewd acquisition right now. On a price-to-earnings ratio of just nine, the shares look decent value for money. My investment strategy of buy and hold for the long term would come into play here. Furthermore, the shares pay a dividend, which would boost my passive income stream. It is worth remembering that dividends can be cancelled at any time, of course.
AGAINST: The current cost-of-living crisis could affect demand for what some may deem as luxury items that IG Design Group sells. Consumers will prioritise food, energy, and other essential goods over such products. This could affect IG’s performance and any future returns.
Better UK shares out there
I would not currently add IG Design Group shares to my holdings. Despite the positives noted above, the negatives outweigh these for me personally. Nobody knows when the macroeconomic issues contributing towards the cost-of-living crisis may subside. These have had a real impact on IG’s investment viability for me.
For that reason I am looking at other stocks to boost my portfolio and provide me with better, stable returns.