Why CPI Card Group Stock Jumped Another 13% Today

What happened

For the second day running, shares of now-Nasdaq-listed credit card manufacturer CPI Card Group (NASDAQ:PMTS) stock closed with better than a 10% gain on Wednesday. (To be precise, the stock gained 12.3% today after racking up a 12.8% gain on Tuesday and a positively modest 6.6% gain on Monday.)

In fact, CPI Group has scored gains every single trading day since reporting its second-quarter financial results on Aug. 12 last week — and I suspect that’s no coincidence.

Image source: Getty Images.

So what

More than a week’s time separated CPI Card Group’s announcement that it was uplisting to the Nasdaq and its first earnings report after getting there, but it was well worth the wait. As the company announced on Thursday, sales for fiscal second-quarter 2021 grew 31% year over year, to $93.2 million. With gross profit margins improving as well — up 750 basis points year over year — earnings for the quarter surged ahead 387%.

On the bottom line, CPI Card Group earned $0.53 per share versus just $0.11 in last year’s Q2.  

Now what

Year to date, CPI Card Group has now earned $0.74. If it maintains that pace, the stock is on track to earn close to $1.50 per share this year, which would give the shares a price-to-earnings (P/E) ratio of just 18 — pretty modest relative to the growth rates CPI has been racking up.

Even better, CPI says that so far this year it has generated positive free cash flow of $19 million, which it has used to pay off some loans, chipping away at its still-sizable $317 million debt load. At the rate it’s generating cash now, the company could be in a position to pay off its debt in under a decade.

Happily, for investors, it’s paying off for CPI’s stock price as well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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