The Halfords share price is up 325%: should I buy now?

The Halfords share price has given very good returns in the past year. Royston Roche discusses the company’s prospects.

| More on:

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.

Arrowings ascending on a chalkboard

Image source: Getty Images.

The Halfords (LSE: HFD) share price has had a very good run. Its shares rose about 325% in the past year. The company has benefitted from the boom in cycling during the lockdown.

The question that arises to my mind is – will the upward trend continue post-lockdown? So, I am looking into more details to see if I should include the stock in my long-term portfolio.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

The company’s fundamentals

Halfords’ financial results have been strong this year. The company is seeing growth from the increased use of bicycles during the lockdown. Cycling like-for-like sales grew by 43% year-on-year in the first seven weeks of the fourth quarter. I think that more and more people will continue to cycle even after the pandemic. 

The Halfords share price is currently trading at a price-to-earnings ratio of 19. This is higher than the five-year average of 11.7. However, when we compare it to the general market, it does not appear to be overvalued. The price-to-sales ratio is 0.63, slightly higher than the historical average of 0.50. So, valuation-wise, even though the stock had a stellar return it is still trading at a decent price, in my view.

I think the company has a number of positive factors. It should benefit from the ageing of UK cars, and from having stores in good locations. About 82% of online orders are clicked and collected in stores. The company has a wide range of options for providing service to its customers. With the increasing use of mobile vans to reach the customers, it will further increase the confidence of its customers that help is at hand if there is a breakdown.

The company expects full-year pre-tax profits of £90m to £100m – compared to £56m for the previous year. The use of technology and move to online sales will further help the company to cut costs in the future.

Halfords might also benefit from sales and servicing of e-bikes and electric vehicles. The company has been hiring and training technicians in this field due to the expected strong demand in this field.

Risks to consider in the Halfords shares

The company has benefitted an essential business. Its profits this year are good due to strong bike sales. However, with the easing of lockdown people will get back to work. Gyms and other recreational centres may slow down the sales of bikes.

The high cost of operating retail stores had reduced the company’s profits in the years leading to the Covid-19. This is evident in the Halfords share price which is down around 10% over a five-year period. The rise of online and discount stores is further increasing the competition in the car parts and bikes business. 

Final view

The company’s financial position has improved a lot during the last year. However, I am not a buyer of the stock today. I would like to watch the company’s performance post easing of lockdown before I decide whether to include the shares in my portfolio. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Royston Roche 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.

More on Investing Articles

Buffett at the BRK AGM
Investing Articles

I’m listening to Warren Buffett about investing for the future

How does Warren Buffett incorporate an uncertain future into his investment strategy? Christopher Ruane explores what he's learnt from the…

Read more »

Worker on sofa and team on laptop screen talking and discussion in video conference and dog interruption.
Investing Articles

The Alphabet share price has fallen 25%. Time to buy?

The Alphabet share price has fallen sharply in 2022 -- and our writer scents a buying opportunity for his portfolio.

Read more »

Close-up of British bank notes
Investing Articles

How I’d invest a Stocks and Shares ISA to target yearly dividends of £1,350

Our writer reckons he could invest a £20,000 Stocks and Shares ISA to generate substantial dividend income. Here's how he…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

UK shares to buy now: how I’d invest a £1,000 lump sum

Our writer highlights some shares to buy now for his portfolio that he hopes offer both growth and income prospects.

Read more »

Investing Articles

3 top FTSE 100 shares to buy in a recession

Our writer explores three FTSE 100 shares that could protect the value of his stock market portfolio in the event…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

Could I double my money with Rolls-Royce shares?

Rolls-Royce shares have been on a downward track this year amid ongoing-pandemic related challenges. But is now a good time…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

Down 50%, are Scottish Mortgage shares a bargain growth pick?

Scottish Mortgage shares have been on a steep downward track over the past six months. Down more than half, is…

Read more »

Note paper with question mark on orange background
Investing Articles

4 reasons why I would — and wouldn’t — buy Tesco shares for June

I’m looking for the best FTSE 100 shares to buy in early June. Is Tesco a brilliant blue-chip I should…

Read more »