While the FTSE 100 recently reached its post-pandemic high, the FTSE 250 is still behind its highs reached at the start of September. This has meant that there are several FTSE 250 stocks that I feel are undervalued at the moment. These two are my current favourites.
Capturing market share
On The Beach (LSE: OTB) has struggled during the pandemic, as the number of people going on holiday has plummeted. As such, the company has continually posted losses, and over the past six months, the share price has fallen 35%. Over the past year, it has fallen around 15%.
The shares have suffered particularly badly recently, as the company warned investors that it experienced suppressed trading in the second half of the financial year 2021. This was because the company extended its off-sale period to 31 August 2021, meaning that customers were unable to book their summer holiday on OTB. This was done to protect customer goodwill and ensure that holidays were not cancelled. It is hoped that this will allow OTB to capture more market share in the long term. Even so, it is now expected that the full-year results in December will be pretty dreadful.
Despite this, I feel that this is now factored into the OTB share price and the future of this FTSE 250 stock is starting to look brighter. Indeed, there has been an increase in bookings in the last few weeks of the financial year. This was especially due to the company’s ‘Free Covid Tests’ promotion and a further softening of government restrictions. For the next financial year, I believe that the online travel agent may be able to re-reach profitability. As such, I’d happily buy more OTB shares.
Another FTSE 250 travel stock
National Express (LSE: NEX) is the other FTSE 250 stock that particularly piques my attention at the moment. While the firm is still struggling due to the pandemic, it has seen a major performance improvement over the past few months. Indeed, in the Q3 trading update, revenues were up to 83% on the same period in 2019.
Furthermore, in the half-year trading update, while the group posted an operating loss of £24.1m, parts of the business have managed to re-reach profitability. This included ALSA (in Spain) and the company’s operations in North America. As the UK Coach service is now operating at 56% of pre-Covid levels, up from 37% at the end of June, it’s hoped that this part of the business can reach profitability soon as well.
There is also the possibility of a merger with Stagecoach, which would hopefully lead to cost synergies and significant growth. If this deal can be completed, I reckon the National Express share price could soar. Nonetheless, there is the risk that this deal will not go through, and this may disappoint investors. Alongside the continual risks caused by the pandemic, this must be considered.
Even so, I feel that NEX shares offer significant upside potential. This is especially true after the shares have fallen around 20% over the past six months. They are up around 4% over the past year. This means that I may add more of this FTSE 250 stock to my portfolio.
Stuart Blair owns shares in National Express Group and On The Beach. The Motley Fool UK has recommended On The Beach. 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.