A UK turnaround share I’d buy to hold for the next 10 years

I reckon this battered UK share could be one of the best stocks to buy for the post-coronavirus recovery. Here’s why I’d buy it today.

| 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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Fitness centre operators like The Gym Group (LSE: GYM) have been hit hard by Covid-19 lockdowns. These leisure companies aren’t out of the woods yet either, as the Delta variant continues pushing infection numbers northwards. However, as someone who isn’t averse to a little risk, I think this UK share could be a great long-term buy.

If anything, the coronavirus crisis has improved the outlook for companies specialising in fitness and wellbeing as the theme of looking after oneself has grown in popularity. What’s more, Britons are particularly enthusiastic when it comes to personal fitness. According to Statista, some 10m people here are members of a health and fitness club. This puts the UK second only to Germany.

The popularity of keeping fit was underlined in The Gym Group’s latest financials. In May, the UK leisure share said trading had beaten its own expectations and that 729,000 members were on its books as of 24 May. This was up from 547,000 less than three months earlier.

Expanding for growth

Encouragingly the business is taking steps to exploit this phenomenon to its fullest. The Gym Group opened four new gyms in April alone. It recently raised £31.2m by placing new shares to accelerate its site expansion programme too. It plans to open 40 new fitness centres over the next 18 months.

The experts at Researchandmarkets.com think the global gym market will grow at a compound annual growth rate of 7.7% through to 2024. It’ll be worth an estimated $96.6bn by the end of the period. And if previous years are anything to go by, operators at the low-cost end of the market like The Gym Group will be the main driver of this growth.

A UK turnaround share on my radar

There’s a risk the UK share might not have things all its own way though. Competition in the gym space is intense and The Gym Group isn’t the only operator to be rapidly expanding. Then there’s the emergence of Peloton, which allows people to work out at home in a novel way. It makes fitness equipment and offers subscriptions for people to take part in live instructor-led group classes.

Peloton had 5.4m signed-up members as of March, an astonishing figure when you consider it only sold its first bike in 2014. The business rolled out a line of cheaper line of treadmills from last September to keep membership growing as well.

??????????????All that being said, City analysts are confident The Gym Group will bounce back strongly from the washout of 2020. They think the UK share will narrow losses to around £31m in 2021, from £47m last year. And they think it’ll bounce back into the black with profits of approximately £10m in 2022.

The business isn’t without its challenges, but I still think the fitness firm could still make me handsome returns over the next decade.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended The Gym Group. 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

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his…

Read more »

Investing Articles

Should I buy this FTSE 250 stock as it soars back to the FTSE 100?

This FTSE 250 stock has rallied following its pandemic woes. This Fool thinks now could be a good time to…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

How I’d aim to transform an empty Stocks & Shares ISA into £1m of wealth!

There's never a better time to start investing in a Stocks and Shares ISA than today. Here's how I'd aim…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Investing £14,708 in this FTSE 100 stock could earn me £1,000 per year in passive income

Is a CMA investigation into anticompetitive practices the cloud cover Stephen Wright needs to start buying shares in a FTSE…

Read more »

Investing Articles

Despite rising 152% in a year, is Rolls-Royce’s share price still a bargain?

While Rolls-Royce’s share price has shot up recently, it still looks very undervalued against its peers, and the business looks…

Read more »