Topps Tiles Shares: These Strategies Offer Potentially Significant Upside, Says Edison

Topps Tiles (LON: TPT) shares have been climbing, rising about 23% year to date and more than 35% over the past three months, as investors respond to improving trading momentum and confidence in the group’s growth strategy, according to analysts at Edison.

In a recent note, the firm told investors that the company’s growth strategy and Mission 365 financial goals, “offer substantial upside from the current share price if achieved over the next few years.”

The analyst points to FY25 results as clear evidence of the operating leverage within the business, with incremental revenue from the Mission 365 initiatives combining with more supportive end markets. 

Adjusted profit before tax rose 46% year on year to £9.2m, landing at the top end of expectations, while revenue growth was broad-based across divisions. 

Higher volumes fed through to improved gross margins at both the divisional and group levels.

Edison highlights trade customers as the main driver of growth, reflecting the focus of Mission 365 on this loyal customer base. 

Retail trends, which had been weak earlier in the year, appeared to stabilise between the first and second halves. 

Stronger profitability is also said to have enabled management to begin normalising the dividend payout ratio towards its long-term target, resulting in a larger-than-expected increase in shareholder returns.

Looking ahead, Edison sees several self-help levers supporting further progress, including continued benefits from Mission 365, improving performance at CTD and Tile Warehouse, and a contribution from the recently acquired Fired Earth business. 

On valuation, Edison says the shares remain attractive despite recent gains. “TPT trades at a significant discount to our unchanged discounted cash flow (DCF)-based valuation of 116p/share,” the firm concluded.