The Motley Fool

I would buy this quality FTSE 100 share right away while its price is still low

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Unpacked boxes in new apartment
Image source: Getty Images

Last week was a poor one for FTSE 100 company Smurfit Kappa Group (LSE: SKG), the share price falling to 1,951p before recovering slightly by Friday’s close, then dipping again early on Monday. It is 31% down on its average trading price for the year and that is more than the fall seen in the FTSE 100 index as a whole.

Is it time to panic? After all, if other investors are dumping the stock, maybe it is an indication of bad times to come for the company, right? Wrong, I say.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

It’s a sale!

Despite its poor performance at the stock exchange in recent months, the paper-based packaging provider still remains a quality purchase. I like to think of Smurfit Kappa’s deeply discounted price as a great product available at an end-of-season sale discount. I think there is limited meaning to be read into the price crash, at least with the information currently available. 

I can’t emphasise enough what a great time the current market downturn is to invest in fundamentally sound companies.  Some examples of such companies I have written about in the past are consumer goods major Unilever, which is a great defensive play and British luxury Brand, Burberry, given its financial health and growth prospects.

Strength in numbers

Similarly, there are at least two big reasons why I think Smurfit Kappa continues to remain an attractive company to invest in. First, its financials. In its last trading update, the company reported increases in both revenues and earnings, adding to the company’s overall financial health. Further, for the 2018 year, the company expects a “materially better outcome” than the previous year. Analysts agree with the company’s management, with a largely unequivocal ‘buy’ rating on the company.

In other words, Smurfit Kappa is a good growth stock.

Expansion drive hedges risks

Second, Smurfit Kappa is on a major expansion path. In 2018 alone, it has made three acquisitions, expanding its geographical footprint to France and Eastern Europe. The company’s revenues are already widely distributed geographically, and the latest acquisitions should reduce its exposure to the economic climate in a particular country further.

Is there any downside to all this? I am uncomfortable about there being little information on how the expansion is being funded. It is likely that the company is taking on debt, but this need not necessarily be a cause of concern. Confidence can be gained from the fact that Smurfit Kappa has had an eye on sustainability in the past, by keeping debt levels in check. In 2017, it reduced its absolute net debt by from €2,805m from €2,941m in 2016. 

Short-term pressures, long-term buy

Some doubts about whether margins can be maintained have also arisen on expectations of a softer price environment coupled with rising cost pressures, but these still need to play out and might be relatively short-term in nature. Overall, I feel the company has more going for it than not and I see it as a good investment for a long-term portfolio.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.