The Motley Fool

I would buy this FTSE 250 share rather than NEXT any day

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.

Dice engraved with the words buy and sell, possibly in FTSE 100
Image source: Getty Images.

If the CEOs of the UK’s consumer-focused companies are losing sleep these days, I’m not at all surprised. It’s all but given that the economy will slow down post-Brexit, though how much and for how long hinges on how the exit deal is framed.

Potentially weaker macros, in this case consumer spending, won’t affect all companies equally though. I think businesses like FTSE 100 retailer NEXT (LSE: NXT) are likely to face rougher conditions than FTSE 250 cinema chain Cineworld Group (LSE: CINE). Here’s why.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

NEXT: Financial outlook cloudy

The retailer’s latest results don’t inspire much confidence. While sales have improved, net profits have declined. Its outlook for 2019 is muted too, with sales growth expected to slow down to 1.7% from 3.1% this year. I’m not sure that should be the case, in so far as the company itself is optimistic about real earnings increases, a key leading indicator of demand for its products. In its own words: “Real Earnings in the UK have remained positive since January 2018 and look like they are still gaining strength as we move into 2019.” This doesn’t add up for me.

Also, pre-tax profits are already down by 0.4% in 2018, and are expected to continue to take a hit next year as well. While this can be attributed to structural increases in costs as the company ramps up online operations, to my mind it’s just not a good mix when combined with lower sales growth expectations. It’s not a total write-off, to be sure, especially with its strong cash-flows and rapidly growing online sales. But there are better performing companies out there that I feel would be a more reliable place for you to invest.

Cineworld: US focus bodes well

This brings me to Cineworld. The company reported a strong 7.2% revenue growth rise and a 9.4% increase in earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2018. Strong US markets have buoyed overall performance, which accounts for 75% of the total revenue share. Sales have increased in the UK and Ireland as well, and while this geography has dropped the ball on profits, it was more than made up by the US and the rest of the world.

Among the companies I have researched, those with big chunks of business from outside the UK have shown good financial health and I think will continue to do so in the future as well. Cases in point being Ireland-based-but-US-focused construction company CRH and packaging and paper products provider Mondi. With the US economy expected to remain strong in 2019, the outlook for US-based businesses should be good too. This includes Cineworld. There’s some concern about the 10x increase in its debt levels during the past year, due to its acquisition of US-based Regal Entertainment. But given its recent financial performance, I think the integration is going well.

With this as the background, even if it faces some rough weather on account of the massive Regal investment, I still think that it’s capable of riding out the tough times, making the shares a good buy. I am less sure that NEXT would be able to handle a demand dip as well as Cineworld.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.