4imprint reports double-digit growth and is gaining market share

Promotional merchandise group 4imprint (FOUR) has enjoyed another year of stellar growth. Total orders received increased by 12 per cent in 2023 and the value of orders also edged up slightly. This drove revenue up by 16 per cent to $1.3bn (£1bn), while operating profit jumped by 32 per cent to $136mn. 

Growth did moderate as the year progressed, due to “much more challenging year-on-year comparatives” and a general slowdown in demand. Research from ASI, a North American industry body, indicated that in the fourth quarter of 2023 year-on-year sales for industry distributors were essentially flat. 

4imprint’s marketing strategy – which has radically improved since the pandemic – also lost some of its power. The group’s headline ‘revenue per marketing dollar’ sat at $8.30, compared with $8.86 in 2022.

The question for investors, therefore, is whether 4imprint is cooling down after a fantastic four years of earnings upgrades and share price gains. It’s a tricky call. An improved marketing strategy has transformed the business – revenue per marketing dollar was below $6 in 2019 – but the biggest benefits may already have been seen. Meanwhile, demand for merchandise seems to be softening across the sector.

At the same time, 4imprint is clearly a well-run, capital-light business that is gaining market share and generating an abundance of cash. Its track record speaks for itself: since 2010, it has generated a total return of 7,357 per cent, easily outstripping Apple (US:AAPL), Microsoft (MSFT) and Meta (META).

Despite its massive gains, however, its price/earnings growth (PEG) ratio is just 0.8. This seems extremely reasonable. Buy.

Last IC View: Hold, 5,160p, 9 Aug 2023