To my surprise, greetings cards seem far from dead. According to entreptneur.com, millennials spend more on cards than any other generation, including baby boomers. Despite their reputation for being digital savvy, millennials are apt to turn to something a little more personal and tangible when the moment matters.

Millennials like cards

Card Factory’s revenue numbers are in keeping with a market that is in good health, with some obvious caveats. From 2013 to 2020, total sales rose from £300m to £452m. There was a lockdown-induced slump to £285m in 2021. But 2022 revenues hit £364m, and analysts forecast 2024 revenues at £464m, surpassing the pre-pandemic peak.

Card Factory’s volume share of the UK greetings card market hovered around 40% before the pandemic. The lockdowns meant Card Factory lost a chunk of volume market share. However, on each occasion, it bounced back. This pattern is evidence of a brick-and-mortar focus as online-focused competitors were able to scoop up market share when shoppers could not take to the streets.

The average price of a greeting card sold online is £2.50, compared to the £1.50 in a store. Perhaps that’s because online cards tend to be customised, which adds value. Card Factory does offer online orders and shipping on its website. It also has the online-only Getting Personal brand, which caters to the customised online greeting and gift card market. However, this is a small business, averaging about 3.5% of total revenues.

Card Factory management focuses on volume market share rather than value. That’s because it is a discount retailer. Its value-based market share of the greetings card market averaged 18% from 2013 to 2017.

Card Factory share price

So would I buy shares in Card Factory for my Stocks and Shares ISA? Well, I would not mind exposure to a market liked by a generation starting to enter its peak spending power. Aside from a few pandemic blips, it has maintained a healthy market share and grown its revenues. The company’s cash flow per share usually exceeds earnings per share (EPS). That’s usually a good sign, and it’s cheap, trading at a P/E ratio of 5.6.

But Card Factory is a discount retailer with limited traction online. This shows in its operating margins. They declined from 22% in 2017 to 16.3% in 2020. Then the pandemic hit, and they now sit around 11.6% over the last 12 months. I am concerned that Card Factory is involved in a price war. Yes, its revenues are growing, but its normalised (stripped of extraordinary or one-off items) EPS was 20.1p in 2017, yet analysts expect them to be 8.56p in 2024.

The Card Factory share price will likely follow earnings and operating efficiency trends more than revenue. So I won’t buy until I feel confident Card Factory is not in a discounted race to the bottom.

Card Factory added four (net) new stores in FY22, with continued plans to expand over the coming years as management progress towards achieving their target of £600m in total revenue by FY26 (calendar 2025). 

New CEO Darcy Willson-Rymer has had an impressive first year since he took on the heavily distressed retailer in 2021. Facing significant financial and operational headwinds during the three national lockdowns, Card Factory appears to be staging an effective turnaround.  

Recently, management successfully negotiated new finance terms with their credit providers, which has removed the contingency for a £70m equity raise. This removes the risk of investors being significantly diluted, which I believe was the main reason why investors have ignored Card Factory for the past year. When the positive news broke on 21 April, Card Factory shares rallied from 45p to 60p.  

Attractive valuation   

Without the risk of dilution, I believe Card Factory stock remains cheap with a forward price-to-earnings (P/E) ratio of 9.4x and a two-year forward P/E of 5.7x. Historically, Card Factory has traded around a forward P/E of 9.8x, suggesting a cheap proposition for me. If the business can regain to pre-pandemic profit levels around £50m in the coming years, the stock could more than double from current levels.

Recession risk 

With the increased risk of recession, Card Factory is well positioned to combat a weakening economic environment. During recessions, consumers are increasing likely to visit various stores as they search for the most attractive value propositions. Card Factory is positioned as the lowest-cost UK gift card retailer, and should be able to maintain its cashflow during recessionary periods. However, average basket spending could decrease as consumers purchase lower priced cards and avoid higher ticket items like balloons or small gifts.

The UK greeting card market is slow and stable, meaning I don’t expect high levels of growth in the long term. The recent 28% increase in revenue year-over-year is impressive, but Card Factory is recovering from a low base due to temporary store closes in 2020 and 2021. Increased freight and labour costs are having an impact on margins; however, Card Factory has started targeted price increases instore.

When’s the dividend coming back?  

Card Factory has paid a dividend every year since it went public in 2014. However, the distributions were suspended during the pandemic. The board plan to reinstate a dividend at the end of 2025 when its debt profile has improved. Prior to the pandemic, shareholders received a dividend of 14p. Based on today’s share price (64p), investors could receive a dividend yield of 22% in three years’ time.

That said, I believe penny stocks can also allow investors to stock up on excellent growth businesses at little cost. With some decent research, there’s a great chance of avoiding the high-risk stocks and digging out the stars of tomorrow.

Here is a soaring penny stock I’d buy for my own portfolio.

Card Factory

Budget greetings cards and gifts retailer Card Factory (LSE: CARD) leapt 6% on Tuesday, thanks to news that full-year profits beat expectations. It is now trading around 62p per share.

For the 12 months to January, the penny stock’s recorded pre-tax profits of £11.1m, having made a loss of £16.4m a year earlier.

The market was pleased at the level of profits at Card Factory which came despite “significant trading disruption and inflationary cost pressures”.

Revenues soared 28% year-on-year to £364.4m as the business was helped by store re-openings following Covid-19 lockdowns. The UK retail share was also boosted by e-commerce sales that were “significantly ahead of pre-pandemic levels” as well.

Online sales were up 135% on the 2020 financial year, Card Factory said.

Why I’d buy this penny stock

Cost pressures are likely to remain a big issue for the retailer for the foreseeable future. Paper costs are rising while increasing energy bills are another threat to profits.

Still, I believe this threat is outweighed by the exceptional sales opportunities it has in the current climate.

Growing stress on shoppers’ budgets means that demand for the lower-cost products it sells could shoot higher. People aren’t going to stop sending cards and celebrating special occasions in these tough times. They’ll simply switch down from more expensive retailers.

I also like the steps Card Factory has taken to improve its digital proposition and to boost its online product ranges. This will stand it in good stead as UK shoppers increasingly shop on the web.

Data giant Ascential thinks 38% of all retail sales will take place online by 2026. That compares with 32% in 2021.

Too cheap to miss?

I also like Card Factory because of its excellent value for money. Despite today’s share price gains, the penny stock trades on a forward price-to-earnings (P/E) ratio of 8.7 times. This is comfortably inside the generally-regarded bargain watermark of 10 times and below.

City analysts think Card Factory’s earnings will soar 169% in this financial year. They expect another 49% bottom line increase in financial 2024 too. I think earnings could continue rising strongly beyond this forecasted period too, making this a top UK share to buy in May.

So what was behind this huge share price surge? And, more importantly, is now the time to buy this stock for my portfolio?

Why Card Factory’s share price just spiked

The reason the share price jumped yesterday was that the company announced it had agreed terms of a refinancing with its current banking partners.

This is a big deal for the retailer, as Card Factory has carried quite a lot of debt on its balance sheet in recent years and it has been unclear as to how it will manage this debt.

Some investors thought the company may have to raise money through an equity raise. This scenario would have been bad for existing shareholders as it would have diluted their holdings, and resulted in a share price fall.

Under the terms of the refinancing deal, Card Factory will have a £100m revolving credit facility (RCF) available until September 2025. It will also have some smaller loan term facilities that need to be repaid between early 2023 and 2025. This should provide financial support for the business and eliminate the need for an equity raise.

Overall, this is a positive development and good news for shareholders. Ultimately, a big risk here has just been removed and that’s reflected in the share price spike.

Should I buy Card Factory shares now?

As for whether I’d buy Card Factory shares today, I’m not convinced the risk/reward proposition is attractive right now.

One thing that concerns me here is inflationary pressure. In January, the company said rising costs will not be fully mitigated by pricing actions, resulting in lower FY2023 profit than previously anticipated. I expect the higher costs to persist for a while.

It’s worth noting that Card Factory has a low gross profit margin (28% last year). Businesses with low gross margins can see their profits fall significantly when inflation is high.

Related to this is consumer spending power. Right now, a lot of UK consumers are really feeling the pinch due to high energy costs. Companies such as Card Factory, which sell non-essential goods, could be impacted negatively if consumers cut back on spending.

I also have concerns in relation to the long-term growth potential here. According to ResearchandMarkets, the global greetings card market is projected to decline in size by about 2% per year between now and 2026. With the market going backwards, Card Factory is going to have its work cut out to generate growth.

Additionally, there won’t be any dividends here for a while. Under the terms of its loan agreements, the company is not allowed to pay dividends in the near term.

So while the refinancing news is definitely positive, I won’t be buying Card Factory shares for my portfolio. In today’s inflationary environment, I think there are better shares to buy.

5.4% dividend yields!

There’s a danger that rising interest rates will hit new homes demand as affordability comes under pressure. However, I’m betting that the size of Britain’s colossal homes shortage means newbuild sales will remain very robust. The National Housing Association has estimated that England alone needs to build 340,000 properties every year to solve the problem.

This is why I’d buy penny stock Topps Tiles (LSE: TPT) today. I think it can expect sales of its products to remain strong as home construction steps up in the years ahead. A bright outlook for the repair, maintenance and improvement (or RMI) market also bodes well for this retail share.

Indeed, B&Q owner Kingfisher announced this week that its sales in the UK and Ireland leapt 17% in the 12 months to January. This was thanks to “[the]renewed importance of the home, more working from home, and the development of a new generation of ‘DIY’ers’” following the outbreak of Covid-19, Kingfisher said.  Importantly, it added that “we expect these broad trends to endure”, which bodes well for Topps Tiles.

Following recent share price weakness Topps Tiles trades on a rock-bottom P/E ratio of 9.4 times. The retailer sports a titanic 5.2% dividend yield as well. I think this kind of value is hard to ignore.

A penny stock for the inflationary crush

Much of the retail sector is coming under extreme pressure as inflation sprints northwards. Latest data from the Confederation of British Industry last week showed that retail sales in March have been “poor” for this time of year. And what’s more, retailers have warned that conditions are expected to remain tough next month too.

I think Card Factory (LSE: CARD) could thrive in this era of high inflation. People are unlikely to stop sending birthday cards and throwing parties as their spending power erodes. They are simply going to shop around to keep the celebrations going at a more affordable price. This means trading at this low-cost greeting cards chain may actually pick up.

That’s not to say Card Factory could have things all its own way however. Paper costs are soaring as shortages of the key material emerge. Furthermore, Card Factory is also facing a storm of rising labour, energy and logistics costs.

Still, it’s my opinion that these dangers could be offset by the opportunities Card Factory could have to grab sales from its more expensive rivals. And besides, at current prices, Card Factory offers very tempting value for money. Today, it trades on a forward P/E ratio of just 6.9 times.

• Revenue and profits are still increasing compared with pre-pandemic results
• A higher forward P/E ratio may suggest the firm is overvalued
• Full-year revenue guidance is expected to be at the higher end of £270m to £285m

Having hit a high of 493p in June 2021, the Moonpig Group (LSE: MOON) share price is currently trading at a  52-week low of around 250p. As a card and gifts service operating in the UK and the Netherlands, this company only publicly listed in February 2021. It has performed well during the pandemic, but the FTSE 250 firm’s share price has fallen as pandemic restrictions have eased. Should I be looking to this business for a long-term investment? Let’s take a closer look. 

A FTSE 250 stock underpinned by strong results?

In results issued for the six months to 31 December 2021, Moonpig’s revenue was £142.6m. This had more than doubled when compared with the same period in 2019, demonstrating the company’s strong performance during the pandemic. A year-on-year comparison, however, shows that revenue declined by 8.5%. The profit figures display a similar trend. A two-year comparisons shows a rise from £9.4m to £18.7m. Year-on-year, however, profit plunged from £33m.

How do I account for this? It seems that the firm benefited from a massive increase in online shopping during the height of the pandemic. This would explain the high numbers for the 2020 figures. Although revenue and profits fell in 2021, this may simply be the company returning to a more ‘normal’ performance  rather than repeating the meteoric rise of a year earlier.

But I feel the company is in a strong position going forward. Moonpig’s ‘reminders database’, a metric by which we gauge its customer base, had grown to over 50m by the end of April 2021. Furthermore, the firm increased its revenue guidance for full-year results to the higher end of £270m-£285m. With a trading update due on 5 April, I will be watching very closely indeed.

Are the shares cheap?

A metric used to judge if a share price is over- or undervalued is the company’s price-to-earnings (P/E) ratio. Moonpig’s forward P/E, that uses estimated net earnings over the next year, stands at 23.7. On its own, this tells us very little. Compared to a major competitor, however, it may indicate that the shares are expensive.

Card Factory, another big player in the cards and gifts space, has a forward P/E ratio of 10.83. This may suggest Moonpig shares remain overvalued, despite falling to a 52-week low.  

On the other hand, investment bank Berenberg gave the firm a ‘buy’ rating in January and issued a target price of 430p. What’s more, independent non-executive director Niall Wass increased his own holding by 76% at the end of last month. This was at a price of 304p.

Moonpig, as a business, has performed well recently. But I won’t buy any of its shares at the moment. I want to wait for the next set of results to ensure the company is still going in the right direction. I won’t rule out a purchase in the future though.

I don’t plan to run for cover however. In fact I plan to follow the example of billionaire investor Warren Buffett and go hunting for bargains to buy.

Here are a couple of penny stocks that have caught my attention at current prices. Each has the potential to supercharge my returns in the coming years.

A top retail share

Many UK retail shares have sunk as investors have considered the impact of soaring inflation on their profits. Card Factory (LSE: CARD), for instance, has fallen 12% so far in 2022 in value as concerns of rising costs and falling consumer spending power have grown.

Okay, Card Factory still remains around a fifth more expensive than it was this time last year. But following that recent share price weakness I think it could be considered too cheap for me to miss. At 52.6p per share, the retailer trades on a rock-bottom forward price-to-earnings (P/E) ratio of 8 times.

I think investors may be making a mistake by heavily selling Card Factory shares. People don’t stop sending cards and celebrating with balloons, poppers and similar party paraphernalia when times get tough. What they do however, is try to buy these items for the cheapest price possible.

In my opinion this means shoppers might shun the likes of more expensive retailers like Clinton Cards and march through value operator Card Factory’s door instead.

I do worry about how Card Factory could fare against the trendier offerings of online-only operators like Moonpig and Thortful. But I believe this threat is more than reflected in this penny stock’s rock-bottom earnings multiple.

Falling into penny stock territory

UK shares with interests in Russia and Eastern Europe have suffered particularly badly in recent days. Take Tritax Eurobox (LSE: EBOX) as an example.

This property stock — which lets out properties in European countries, including Poland — has seen its share price slump to 14-month lows this week. It now sits inside penny stock territory around 99.2p having fallen 16% over the past 12 months.

The situation in the region is truly dreadful, and we all hope it can be resolved soon. But I like Tritax Eurobox’s long-term prospects and think a fall in its share price is worth looking at. I know the current situation could cause demand for big-box property assets to fall in its Central and Eastern Europe territories. But as a long-term investor, I see the advantage of owning Tritax Eurobox shares. I think profits could soar as e-commerce turbocharges the need for warehouse and logistics spaces.

I like the company’s ongoing expansion in fast-growing markets (this week it paid €144.3m to acquire a property in the Netherlands). I think this UK share is particularly good to help me boost my passive income; its forward dividend yield sits at 4.5%.

Greetings and gift cards

Card Factory is a specialist retailer of greeting and gift cards as well as party products. It has over 1,000 stores in the UK and Ireland. It also now has an extensive online store to supplement its offering.

Due to its bricks-and mortar-business model, Card Factory struggled when the pandemic struck, as many of its stores were closed due to restrictions. Its share price tumbled and it had to borrow money and offer new shares to raise funds to keep the lights on. This did not help with investor sentiment. Unfortunately, recent years have seen the rise of online-only disruptors to its market, which has affected market share.

As I write, Card Factory shares are trading for 57p, making it a penny stock. At this time last year, the shares were trading for 33p, which is a 72% return over a 12-month period.

UK shares have risks

Despite my bullish attitude towards Card Factory’s growth potential, there are credible risks that could derail its progress. Firstly, the nature of the pandemic and threat of new variants could see retail locations closed once more if new restrictions come into force. This affected performance previously and could do so once again.

In addition, Card Factory has had to evolve to combat the threat of online-only disruptors. The rise of e-commerce has seen many consumers stay away from retail outlets and use online-only platforms for their greeting cards and gifts. I myself have used competitors such as MoonPig in recent times when sending cards or gifts to loved ones. These competitors could continue to eat away at market share and affect performance and returns.

A UK share I’d buy

I believe pandemic-related struggles could be a thing of the past for Card Factory. Firstly, its retail network is still as strong as ever and it plans to continue opening new stores in key locations if they could boost performance.

Next, Card Factory decided to bolster its online offering when faced with threats of competition and the changing face of retail. It plans to become a “multi channel retailer”. I believe past results after its online re-brand occurred show this could help boost growth in the years ahead with online sales growing exponentially. I do understand past performance is not a guarantee of the future, however.

Coming up to date, a trading update Card Factory provided for the 11 months ended 31 December 2021, filled me with confidence for the outlook ahead. It upgraded revenue expectations for the full-year period. It also confirmed it expects sales to grow nicely from over £360m last year, to more than £600m within a five-year period. Profit is not yet near pre-pandemic levels but overall trading seems to be. This tells me recovery and an eye on growth ahead is in full effect.

Overall I like the look of Card Factory shares for my holdings right now. I would add shares and expect to see growth and excellent returns over the long term.

Tarnished brand but a solid business: Boohoo

To say that online retailer Boohoo (LSE: BOO) has had a hard time lately is putting it mildly. The shares’ prices sat 68% below where they were a year ago, at the time of writing this article earlier today.

Clearly there are risks here. The company’s supply chain has come under critical scrutiny, potentially reducing the brand’s appeal to its customers. Cost inflation, supply chain problems and unexpectedly high return rates led the company to issue a profit warning last month.

But I think the Boohoo share price may now be focussed on the risks while ignoring the opportunities. It trades at 15 times last year’s earnings. That seems cheap given its strong growth prospects. While this year’s earnings may be lower, I see continued opportunities for the firm to expand its business, which last year saw revenues increase 41%. I would consider buying it for my portfolio now.

Strong business growth outlook: S4 Capital

Another company whose shares have taken a tumble lately is digital ad agency holding group S4 Capital (LSE: SFOR). Its shares are down 39% from their September high.

The S4 Capital share price is now within 1% of where it stood a year ago. I regard that as a bargain given the strong growth in the company since then. Last week it reiterated its expectation of doubling revenues and profits organically within a three-year period. It will likely grow further by bolting on acquisitions, another one of which was announced last week.

The S4 share price tumbled after it warned of higher costs to integrate acquisitions. That risks diluting profit margins. But last week the company tackled investor concerns and said that it is targeting “an improvement in the operational EBITDA margin back towards previous levels“. S4 is working hard to restore shareholder enthusiasm. I see strong growth potential and tightened cost control as possible drivers to push the share price higher in 2022.

UK shares in recovery mode: Card Factory

Retailer Card Factory (LSE: CARD) may help its customers celebrate special moments but it has had limited cause for celebration itself lately. A trading statement last week hurt the shares, but the company actually upgraded its revenue expectations for the year. It expects sales to grow strongly, from over £360m last year to more than £600m within five years.

Profits before tax for last year are expected to be £7m-£10m. That compares to £65m before the pandemic. But it shows that the company is in recovery mode. With the expected sales growth, I think it can surpass pre-pandemic earnings in years to come.

Supply chain risks could hurt the company if increased shipping costs damage profit margins. The shares have risen 46% over the past 12 months. I think a return to profit and plans for strong revenue growth could propel the shares higher in the coming year. I would consider adding Card Factory to my portfolio.

Zaven Boyrazian: Bioventix

Bioventix (LSE:BVXP) is a specialist producer of monoclonal antibodies. These are an essential ingredient for performing blood tests when diagnosing a patient. It’s undoubtedly a niche product but remains in high demand as revenues have consistently grown by double digits over the last five years.

Recently, the stock has taken a hit as hospitals have prioritised spending in areas dealing with Covid-19. Consequently, the group’s bottom line has suffered for it. But, with the vaccine rollout making good progress and the world adapting to the pandemic environment, these disruptions may soon be coming to an end.

As such, I think this could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Bioventix.

Ed Sheldon: Calnex Solutions

My top British small-cap stock for January is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

Calnex looks well placed to benefit from the global telecommunication industry’s upgrade to 5G technology. 5G is ultimately the key to many of the exciting new technologies we keep hearing about such as self-driving cars and remote surgery. Networks will need to be tested thoroughly in order for these kinds of technologies to go mainstream.

One risk to consider here is the ongoing semiconductor shortage. This could cause disruption. However, with the stock trading on a P/E ratio of less than 25, I think the risk/reward proposition is favourable.

Edward Sheldon owns shares in Calnex Solutions.

Roland Head: Finsbury Food

My small-cap pick for January is bakery firm Finsbury Food (LSE: FIF). This group supplies supermarkets and also sells under its own brands.

Finsbury has been going through a turnaround period, but now appears to be trading well. Earnings rose by 15% last year and brokers expect growth of 26% for the year ending 26 June.

Rising costs are a concern and supermarkets will always be tough customers. But I’m impressed by Finsbury’s recent performance. I think the stock still looks good value at under 10 times forecast earnings. I hold Finsbury shares and would buy more.

Roland Head owns shares of Finsbury Food.

Rupert Hargreaves: Michelmersh Brick Holdings

My top small-cap is Michelmersh Brick Holdings (LSE: MBH). The specialist brick manufacturer looks set to report a bumper year of growth for 2021, which could underpin further development in the year ahead.

The firm has no debt and a cash-rich balance sheet, suggesting that it has the financial headroom to support its growth ambitions this year. There is also room for shareholder returns. Michelmersh currently supports a dividend yield of 2.5%.

Inflation and competition are the two primary risks the business will have to overcome going forward. Despite these challenges, I would buy this small-cap stock today.

Rupert Hargreaves does not own shares in Michelmersh Brick Holdings.

G A Chester: B.P. Marsh & Partners 

B.P. Marsh (LSE: BPM) is a specialist investor in unquoted, early-stage financial services businesses that are in need of growth capital. 

Marsh looks for strong management and business plans. It takes a minority equity stake (typically 20%-40%), and aims to be a supportive, long-term partner. It works with management to grow the business’s value, ultimately towards a profitable exit via a public flotation, trade sale or other route. 

It has a long history of delivering value for shareholders through net-asset-value (NAV) appreciation and dividends. The shares are currently trading at a 20%+ discount, and I’m expecting a further NAV uplift in an early-February trading update. 

G A Chester has no position in B.P. Marsh & Partners.

Niki Jerath: Zephyr Energy 

For January, I’m looking at Zephyr Energy (LSE:ZPHR). This has oil and gas interests in Utah, Colorado and North Dakota.  

As oil and gas prices increased during 2021, its shares surged by over 600%. Although year-to-date, the stock is down around 2% due to worries about the Omicron variant. 

That said, its Paradox Basin project, in Utah, shows a lot of promise for 2022 and it has a pending deal in North Dakota, which was delayed last year. 

I could be wrong, but if the transaction goes ahead, I expect the share price to see a jump. 

Niki Jerath does not own shares in Zephyr Energy

Royston Wild: Card Factory 

I think Card Factory (LSE: CARD) is a small-cap stock whose eye-catching all-round value merits serious attention. The card and greetings retailer trades on a forward P/E ratio of below 6 times. It sports a mammoth 6.1% dividend yield as well. 

I like Card Factory for a number of reasons. Its strategy of selling products at low prices puts it in good shape to ride the value retail revolution. Recent investments in digital will allow it to make money during the e-commerce boom. I also like Card Factory’s focus on a more-defensive part of the retail market. We don’t stop celebrating birthdays, Christmas and other special occasions when times get tough, right? 

Royston Wild does not own shares in Card Factory.

Paul Summers: Cake Box Holdings

At 25 times earnings, shares in Cake Box Holdings (LSE: CBOX) certainly aren’t cheap. That said, the company’s fundamentals help justify this valuation. Returns on capital and operating margins are consistently high and there’s net cash on the balance sheet. CEO Sukh Chamdal also owns almost 25% of the company, which should mean that his interests are aligned with those of other investors.

Having already climbed 70% in the last year, share price growth may moderate in 2021. However, this looks like the sort of quality minnow I’d be comfortable holding a stake in for years rather than months.

Paul Summers has no position in Cake Box Holdings

Andy Ross: Property Franchise Group 

Shares in Property Franchise Group (LSE: TPFG) bring together an attractive combination of growth and income. Over three years the shares have gone from 120p to around 314p. Historic share price growth then has been good. The dividend yield is currently around 3%, but with decent levels of dividend cover, as well as earnings growth, I’m sure the dividend can keep growing.  

As a franchising operation, the business has high operating margins and returns on capital. For me, this makes Property Franchise Group a top British small-cap stock and I’ll likely be adding more, especially if the share price dips again.  

Andy Ross owns shares in Property Franchise Group.