PMTS

We rate CPI Card Group Inc. (PMTS) as Avoid with a composite score of 39.3/100 at a current price of $12.62. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in value (66th percentile) and stability (42th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (29th percentile) and momentum (31th percentile) tempers our overall conviction. We assign a No Moat rating (27/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CPI Card Group Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 39.3/100 places it at rank #3634 in our full 7,333-stock universe. At $179M in market capitalization, CPI Card Group Inc. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 16%, though momentum at the 31th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 32% (-27.2pp vs sector) narrow to operating margins of 11% (+7.1pp vs sector) and net margins of 1.8%, yielding a gross-to-net conversion rate of 5%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $12.62, CPI Card Group Inc. is trading near fair value based on current fundamentals. Our value factor score of 66/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 15.4x (a 35% discount to the sector median of 23.7x), EV/EBITDA of 7.5x (discounted to peers), P/S of 0.3x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to CPI Card Group Inc.. The stock presents a balanced risk profile: risk factors are within normal ranges. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

We identify no major risk factors at this time. The company's stability factor sits at the 42th percentile with quality at the 41th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate CPI Card Group Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-70.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — CPI Card Group Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, CPI Card Group Inc. receives a Avoid rating with a composite score of 39.3/100 (rank #3634 of 7,333). Our quantitative framework assigns a No Moat (27/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 42/100.

Our analysis does not support a constructive view on CPI Card Group Inc. at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.