Recovery continues for the FTSE 100 index. The index value is averaging at 7,100 for June up till now, making it the best month since February last year. But, this also suggests that the index has not gone back to the levels it was at before the first signs of investor nervousness started showing up.
It follows that there are index constituents that have not gone back to their pre-pandemic highs either. Consider the examples of two FTSE 100 stocks, ITV (LSE: ITV) and Smith & Nephew (LSE: SN). Both stocks have come a long way since the market crash last year, to be sure. But unlike say, the real estate stock Persimmon or miner Rio Tinto, they have neither reached all-time highs nor moved way past the pandemic. I am optimistic for both stocks, however.
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ITV stock shows promise
First, consider the broadcaster ITV. In its latest trading update, the company reported an increase in revenue for the first three months of 2021 compared to the same time last year. This is a welcome change after its results were impacted by Covid-19 last year. In its outlook, it expects more improvements during the year.
Its share price has almost doubled over the past year, but in relative terms the stock is still cheap. It has a price-to-earnings (P/E) ratio of around 18 times, which is way lower than that for many other FTSE 100 stocks right now. While we really do not know if the pandemic will be truly over any time soon, if investor optimism is sustained and the economy continues to look better, I reckon ITV’s share price will be back to pre-pandemic highs sooner rather than later.
Smith & Nephew share can take time to recover
Similar to ITV, medical technologies company Smith & Nephew has reported a positive trading update. For the first three months of the year, the company showed an 11.5% increase in revenues. It expects this progress to continue through 2021, after having suffered a setback last year. The supplier of implants for hip and knee replacement surgeries saw a fall in demand as these elective surgeries were postponed during the pandemic.
Despite the positive development, however, the Smith & Nephew share price has not shown consistent growth. In fact, over the past year, it has been fluctuating and has made almost no gains. Moreover, its P/E at 43 times does not make it the most attractive stock around these days either.
Still, I think that as its financials improve, particularly its earnings, it will look more attractive from a P/E standpoint. And then its price can start rising. However, I reckon that the Smith & Nephew share price could take longer to get back to pre-pandemic highs than the ITV share price.
While both stocks have positive prospects, I will follow their developments for a bit longer before buying these shares. In the meantime, I will consider buying these stocks.