In recent months a variety of assets, including Bitcoin, have lost a significant portion of their market value. The virtual currency has dropped in price by over 80% since reaching a high of almost $20,000 in December 2017. As such, it may become of interest to investors seeking to buy into a recovery play.
However a number of shares, including FTSE 100-member Next (LSE: NXT), may now offer wide margins of safety and turnaround potential. As such, the retailer could be worth buying alongside another recovery opportunity which reported an encouraging update on Tuesday.
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Improving outlook
UDG Healthcare (LSE: UDG) reported a solid start to its financial year in its trading update. The international provider of healthcare services has recorded a rise in pre-tax profit for the quarter to the end of 31 December 2018 versus the same period of the previous year. It has achieved good underlying growth that has been supplemented by the impact of recent acquisitions.
There was encouraging performance from its Ashfield and Sharp segments, with profitability being ahead of the same period of the previous year. Ashfield’s Communications and Advisory sector performed well, while Commercial & Clinical has performed in line with expectations. Sharp has seen improving trading conditions in the US, which have catalysed its financial performance.
Looking ahead, UDG Healthcare is forecast to post a rise in earnings of 9% in the current financial year. With the stock having fallen in value by around 25% in the last year, it now has a P/E ratio of 16. This suggests that it may offer good value for money, as well as recovery potential.
Turnaround prospects
While Next’s share price has risen by 20% so far in 2019, the retailer is still down by 23% since its June 2018 level. This is perhaps unsurprising, since investors have generally become increasingly risk-averse during that time. With Brexit fears remaining in place, consumer confidence is low, and this could contribute to challenging trading conditions for retailers. Further shifts of shoppers towards online may also put more pressure on bricks-and-mortar shops over the long run.
Despite these challenges, Next appears to be outperforming many of its sector peers. It continues to deliver positive overall sales and profit growth, with its ability to change its operating model likely to be a major ally over what may prove to be a period of major change across the retail segment. With a track record of adaptability, the company could prove to be a relatively successful business in a mixed wider industry.
As Next now has a P/E ratio of 11, it appears to offer good value for money compared to a number of FTSE 100 shares. Its track record and strong fundamentals mean that it may have less risk than Bitcoin, which ultimately could prove to be impossible to accurately value as a result of its lack of real-world usage potential. As such, the FTSE 100 retailer could be a better recovery prospect in my opinion.
