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Here’s Why You Should Sell Cimpress (CMPR) Stock Right Now

Zacks

Based in Venlo, Netherlands, Cimpress N.V. CMPR employs 10,000 people globally across manufacturing, marketing, technology, software development, sales and support functions. It has offices and manufacturing facilities across Europe, North and South America, India, Australia, Philippines, China and Japan.

Cimpress currently carries a Zacks Rank #5 (Strong Sell). Let’s have a look at the factors which are affecting stock.

Cimpress reported lackluster third-quarter fiscal 2017 results with a wider GAAP loss. Both revenues and loss for the quarter missed the respective Zacks Consensus Estimate. Margin pressure remains a significant headwind for the company as gross margin contracted to 51.2% from 54.9% in the year-ago period. Higher operating costs pose another challenge, while restructuring charges further lowered profitability.

The company has underperformed the Zacks categorized Commercial Printing industry with an average return of 0.22% compared with 1.11% gain for the latter, over the last 30 days. Over the same period, the consensus estimate for the current quarter slumped from 29 cents to 7 cents today. Despite enjoying a leading position in the industry, Cimpress faces significant competition from traditional graphic design and printing companies and other online suppliers. Moreover, increasingly advanced desktop publishing software and more capable desktop printers offer small businesses another cost-effective solution for their marketing needs. While these sources cannot meet the breadth of product offerings provided by Cimpress, they can handle the day-to-day marketing needs of small business customers. This could harm the top-line growth of the company.


Headwinds in currency translation could add to the woes as Cimpress generates almost half of its revenues outside the U.S. The strategic repositioning of the Cimpress brand also entails a huge risk. Presently, when the economy of Europe is highly unpredictable post the Brexit referendum, it becomes difficult for the company to increase revenues and reduce costs. In addition, Cimpress is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company. All these are likely to undermine its growth potential to some extent.

On a P/S basis, Cimpress looks relatively overvalued compared with the industry. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Right now, Cimpress has a P/S ratio of about 1.28. This is relatively higher than the industry average of 0.44.

Stocks to Consider

Some better-ranked stocks in the industry include Hitachi, Ltd. HTHIY, Publicis Groupe S.A. PUBGY and InnerWorkings, Inc. INWK. Publicis Groupe and InnerWorkings carry a Zacks Rank #2 (Buy), while Hitachi sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hitachi is currently trading at a forward P/E of 10.9x. It has a long-term earnings growth expectation of 13%.

Publicis Groupe has a long-term earnings growth expectation of 9.51%. It is currently trading at a forward P/E of 14.6x.

InnerWorkings has a long-term earnings growth expectation of 21.7%. It is currently trading at a forward P/E of 23.6x.

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