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As the FTSE 250 index rises, will the RMG share price maintain its recovery?

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FTSE 250 company Royal Mail (LSE:RMG) has had a tough couple of years. Its troubles began long before the coronavirus pandemic wreaked havoc on the world. The postal service has been battling poor industrial relations, a decline in letter volumes, and an increase in spending. Recent regulatory news announced the group CEO was to step down with immediate effect pointing to the likelihood that its annual update due later this month will not be reassuring. The RMG share price has been declining since May 2018 and although it has rallied from a low of £1.23 in April, it is still down 10% in a year.

A billionaire boost for the RMG share price

Rumours of a takeover bid are rife since it became apparent a renowned billionaire has built up a considerable stake in the ailing business. Czech businessman and lawyer Daniel Kretinsky now has over £100m worth of shares in Royal Mail. This is over 6% of its total share allocation and makes him the fourth biggest shareholder. If this turns out to be true shareholders buying in at recent lows could stand to profit. However, if Kretinsky sells his shares the RMG share price is likely to slide further.

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One reassuring aspect for this ailing stock is that Royal Mail is thought to have a property portfolio worth upwards of £3bn. This nearly doubles its £1.8bn market capitalisation. Its price-to-earnings (P/E) ratio is 10, earnings per share are 17p, and it offers no dividend since the board cancelled it back in March.

Uncertainty about the RMG share price remains and I am not sure how quickly it can recover.

Market gains not such a gamble

A FTSE 250 stock I prefer is Playtech (LSE:PTEC), a company that creates software for trading industries in gambling and finance. In response to the coronavirus pandemic and subsequent cancellation of sporting events, Playtech suspended its dividend and halted its €40m share buyback programme. Today it has a P/E ratio of 8 and earnings per share are 37p. The pandemic pause on retail and sports betting is taking its toll on the gambling industry. But increased market volatility has boosted trading volumes and business for Playtech. Since the March market crash, the Playtech share price has increased by almost 200%!

I think this is a technology company that has room for further growth and expansion. The world’s gaming industry is being more and more closely regulated, and Playtech could be in a skilled position to build on this. Just this week two of its directors bought large shareholdings in Playtech after hearing the favourable news that US authorities had agreed it can sell its casino product in New Jersey. Playtech is seeking further regulatory clearance in other US states.

While I am not feeling bullish on the RMG share price, I think Playtech has room for growth and looks a promising alternative FTSE 250 stock

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Kirsteen 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.

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