As a small-cap stock, Ramsdens (LSE:RFX) obviously doesn’t get the same coverage as FTSE 100 heavyweights. But it has been quietly outperforming many larger UK stocks in recent years, making shareholders richer along the way.
Today (3 June), they got more good news as the share price popped 8% to reach an all-time high of 495p. This takes the five-year return above 200%, with skyrocketing dividends on top.
Why is Ramsdens on fire? And is it still worth considering today?
A golden period
Ramsdens makes money through pawnbroking loans, the purchase of precious metals, the buying and selling of jewellery, and foreign currency exchange. You might have encountered its dark green shopfronts on the high street.
The mention of precious metals probably lets the cat out of the bag. The firm has benefited hugely from the sustained high gold price.
Today, we got Ramsdens’ H1 FY26 results (covering the six months to 31 March), and they were very impressive.
- Revenue up 62% to £83.7m.
- Gross profit rose 48% to £40.1m.
- Pre-tax profit up 173% to a record £16.7m.
- Basic earnings per share (EPS) increased 173% to 37.9p.
The eye-popping figure is obviously the huge jump in earnings, which was driven by the elevated gold price and higher volumes in its precious metals division. Here, Ramsdens buys unwanted jewellery from customers and either retails it (in-store or through its website) or sells it on to a bullion dealer.
Beyond gold, Ramsdens is benefiting from its diversified operations. Pawnbroking and retail jewellery delivered gross profit growth of 18% and 31%, respectively.
Our success is not solely down to the increased gold profits. Rather it reflects the strength of our diversified model and the strength of our trading across the business.
CEO Peter Kenyon.
After this strong showing, management upgraded full-year profit guidance to £30m–£33m (from £28.6m previously). And on top of a 33% hike in the interim dividend, the firm announced a 3p special dividend, taking the total to 9p.
Is pawnbroking predatory?
Unsurprisingly, given the ongoing cost-of-living squeeze, pawnbroking loans are at record levels. By 31 May, the firm’s loan book had reached £14.5m, up from £10.6m in H1 FY25.
But it’s worth pointing out that Ramsdens isn’t some high-street predator taking advantage of skint consumers. It doesn’t do unsecured payday lending or send debt collectors to the door.
The chief executive says: “[W]e have a good, embedded culture to do the right thing. Our purpose is to help with everyday life“.
There’s also a positive corporate culture, with Ramsdens named in The Sunday Times‘ Best Places to Work list last month.
But is the stock still worth considering?
The biggest risk to profits, of course, is a crash in the price of gold. Also, rising inflation and unemployment could hurt its retail and currency exchange businesses (less disposable income for holidays).
That said, most economists predict gold will remain elevated moving forward due to various factors (central bank buying, massive government debts, geopolitical volatility, etc).
But even with lower gold profits, Ramsdens is confident of further growth as it expands beyond 172 stores and builds its online presence.
The stock’s still trading reasonably, at 11 times forward earnings, while offering a 3.8% forward yield. Weighing things up, I reckon Ramsdens is worth a look today.
Should you invest £5,000 in Ramsdens Plc right now?
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Ben McPoland has no position in any of the companies mentioned.
