In light of the economic uncertainty, one of the most important characteristics I look for in stocks is resilience. This is crucial as it helps companies get through challenging conditions and thrive thereafter. Here, Cake Box (CBOX ) ticks all the boxes given its rock solid balance sheet, positive cashflow and capital-lite franchise model.

Despite being impacted by unseasonally hot weather last summer, tough year-on-year comparatives, consumer belt tightening, elevated input costs and people taking more overseas holidays.

The provider of specialty and egg-free fresh cream cakes said today that it had traded in line with FY23 expectations – in other words, consensus adjusted PBT of £5.25m on revenues up 5% to £34.6m (from £33.0m last year and £18.7m in FY20 before the pandemic).

Better still, second-half like-for-like sales were positive (against a drop of -1.1% in the first half) thanks to successful digital advertising campaigns, and consumers acclimatising to the cost of living crisis.

Elsewhere operating margins appear to have also improved sequentially to over 18% (from 12.5% in the first half) with net cash climbing by £2.1m to £6.3m (15p a share) as at the end of March 2023.
    
Similarly, I suspect Cake Box might even be winning market share, as smaller ‘mom and pop’ rivals are hit by the tougher environment. And longer term, the firm continues to increase its geographic reach - growing to 205 stores from 185 last year -  and invest in drivers of quality growth, such as refrigerated vans, a new cheesecake production line, and waste reduction initiatives. It also reported a robust pipeline of potential new franchisees.

Consequently, I would value the business on a 12x FY24 EV/EBIT multiple , when EBIT is expected to hit £6.0m. Adding on the cash, that would generate an intrinsic worth of 195p a share (from 120p today), together with paying a generous 5.7p dividend, implying a 4.8% yield. Broker Shore Capital Markets believes the current price represents a "compelling entry point into a capital light, cash generative growth business," while Liberum has a 250p price target. 

CEO Sukh Chamdal commented: “Just as during the pandemic, we have faced an unprecedented set of circumstances this year, with the war in Ukraine causing a rise in energy and raw material prices and a cost of living crisis impacting consumer confidence. The business showed resilience during a difficult H1’23 - and encouragingly, we have seen sales recover in H2 with raw material prices stabilising. We have been mindful to protect our value proposition. On this basis, we have been highly selective with price increases - [which has] increased retention and continued to attract new customers to the The Eggfree Cake Box brand."

Watch out for the preliminary results in June.