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Here's Why You Should Avoid Betting on Cimpress (CMPR) Now

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Cimpress plc CMPR has failed to impress investors with its recent operational performance due to the challenging end-market conditions amid the coronavirus outbreak.

The Zacks Rank #5 (Strong Sell) company has a market capitalization of $1.9 billion. In the past six months, the stock has lost 34.1% against the industry’s decline of 14.6%.

 


 

Let’s delve into the factors that might continue to take a toll on the firm.

Low Booking Environment: Of late, Cimpress’ small and medium-scale businesses have been suffering significantly from the lower demand for products on account of the coronavirus outbreak-led market downturn. For instance, in May 2020, the company’s Vistaprint segment’s bookings fell 18% year over year and that for the Upload and Print segment recorded a decline of 40%. Also, for the month, bookings in the National Pen segment declined 43% on a year-over-year basis.

Notably, the company’s consolidated bookings for April and May declined 51% and 25% year over year, respectively. Notably, the duration of the coronavirus pandemic, and the impacts of the governmental regulations imposed in response to the crisis will likely have an adverse impact on its results in the quarters ahead.

High Debt & Lower Times Interest Earned Ratio: The company’s highly leveraged balance sheet also remains concerning. For instance, in the last five fiscal years (2015-2019), its long-term debt increased 18.1% (CAGR). Exiting the third quarter of fiscal 2020 (ended March 2020), its long-term debt stood at $1,647.2 million, reflecting an increase of 27% sequentially. The stock looks more leveraged than the industry. Notably, its debt/capital ratio is currently pegged at 0.90, higher than 0.75 of the industry.

In addition, the company's ability to meet its debt obligations based on its current income has declined over the past quarter. Notably, its times interest earned ratio is 2.3, lower than 3.8 recorded at the end of the previous quarter. Further increase in debt levels can raise the company’s financial obligations.

Estimate Trend: Further, in the past 60 days, analysts have increasingly become bearish on Cimpress, as evident from downward earnings estimate revisions. Notably, the Zacks Consensus Estimate for its fiscal 2020 (ended June 2020, results are awaited) earnings has trended down from $7.91 to $2.84 on two downward estimate revisions versus none upward. In addition, over the same timeframe, the consensus estimate for fiscal 2021 (ending June 2021) earnings has trended down from $4.33 to $1.40.

Stocks to Consider

Some better-ranked stocks from the Zacks Consumer Discretionary sector are Activision Blizzard, Inc. ATVI, Crocs, Inc. CROX and Gray Television, Inc. GTN. While Activision Blizzard currently sports a Zacks Rank #1 (Strong Buy), Crocs and Gray Television carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Activision Blizzard delivered a positive earnings surprise of 31.34%, on average, in the trailing four quarters.

Crocs delivered a positive earnings surprise of 10.07%, on average, in the trailing four quarters.

Gray Television delivered a positive earnings surprise of 56.71%, on average, in the trailing four quarters.

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