The stock of CPI Card Group (PMTS, Financial) saw a significant surge, climbing 9.63% following the release of its Q3 earnings report. The company, known for its manufacturing of credit and debit cards, surpassed revenue expectations, making a notable impact on investor confidence.
CPI Card Group reported sales of $124.8 million, exceeding analyst expectations of $117.1 million, a year-over-year increase of 18%. This growth was driven by strong demand for debit, credit, and prepaid cards. However, the earnings faced pressure due to $8.8 million in debt refinancing costs, resulting in earnings per share of $0.11, below the anticipated $0.51.
In terms of debt management, CPI Card Group redeemed $268 million of senior secured notes due in 2026 with an 8.6% interest rate, replacing them with $285 million in notes due in 2029 at a 10% interest rate. The company also enhanced its capital access by securing a $75 million revolving credit facility. These strategic moves will lead to higher interest costs but effectively extend the debt maturity by three years, which is crucial for their long-term financial strategy.
Additionally, CPI's majority shareholder reduced its stake by selling 1.4 million shares, bringing their ownership down from 56% to 43%. This marks the end of the company being under a controlling shareholder, potentially leading to greater market flexibility and investor interest.
Analyzing the stock's financial health, CPI Card Group (PMTS, Financial) is currently priced at $24.71. The company has a market capitalization of $275.71 million and a price-to-earnings (P/E) ratio of 16.26. The GF Value, which provides a valuation estimate, suggests the stock is modestly overvalued with a GF Value of $21.08, as referenced in their GF Value page.
CPI Card Group (PMTS, Financial) has also been noted for several financial strengths, including an expanding operating margin and insider buying activity. However, it should be noted that the Altman Z-score of 2.99 places the company in a grey area, indicating some financial stress that requires attention.
Looking forward, CPI Card Group projects sales growth in the mid- to high single digits for the year, with an expectation of improved EBITDA. Despite the challenges, the company aims to slightly surpass free cash flow levels from 2023, which is an upgrade from prior forecasts indicating a considerable decline.
