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One of many FTSE 250 shares I maintain has had a tough 2024. It lower its dividend. The share worth has fallen 18% to date this yr – and 45% over the previous 5 years.
There might be extra unhealthy information to return, I reckon, that means the share might fall additional within the coming yr.
However I proceed to carry it partly as a result of I feel its worth has fallen greater than justified and, on the present stage, it presents a possible discount for a long-term investor like me.
Properly-known retailer
The corporate in query is Topps Tiles (LSE: TPT).
It truly operates below a lot of manufacturers, however the Topps model itself is notably well-known after a long time within the enterprise. Between its giant property of retailers and sizeable digital footprint, the corporate has established a robust place within the tiles market. In actual fact, it’s answerable for considered one of each 5 tiles bought throughout the nation.
Nonetheless, Topps has had an undeniably robust yr. Demand for tiles has been shrinking and, although Topps says it has gained market share, a shrinking market means its gross sales have additionally been falling.
On high of that, it purchased property from a failed rival in a deal now being investigated by competitors authorities and has been criticised by Topps’ largest shareholder.
Why 2025 might be a turnaround yr
Personally although, I feel that deal was probably one of many higher strikes the FTSE 250 agency made this yr. It has probably elevated its attain in skilled markets, comparable to architectural practices.
Long run, Topps stays centered on the technique of rising gross sales. Whereas market demand might ebb and circulate with the housing market I count on that demand for tiles and flooring coverings will probably be substantial over the long term. By constructing a robust place in that market, I see Topps as being in an excellent place for future profitability.
If it will probably combine the acquisition and display that latest weak efficiency in its enterprise is being addressed, I feel the Topps share worth may transfer up in 2025. The present market capitalisation of £76m seems to be low to me.
Plenty of work to do
In apply although, issues may additionally go from unhealthy to worse.
The broader tile market may proceed to battle, hurting Topps within the course of. Weak client spending may imply some house owners delaying non-essential repairs. I see that as a threat to Topps’ means even to take care of its present gross sales revenues, not to mention the corporate’s goal of rising its gross sales to a median of £1m per day.
So I see a risk that the Topps Tile share worth may tread water, or fall additional, in 2025.
But long run, I really feel optimistic primarily based on what I see as an unreasonably low present valuation. I’m hopeful the share will bounce again, maybe as quickly as subsequent yr if gross sales tendencies enhance. I plan to maintain holding the share.
