This FTSE 100 share has crashed 54% in a year. Time to buy?

The FTSE 100’s worst-performing share over the past 12 months has crashed by 54%. After such a collapse, is this stock now a bargain buy or a growth trap?

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Over the past 12 months, the UK’s FTSE 100 index has risen 16.6%. Adding in cash dividends of roughly 4% takes this gain to around 20.6%. Not bad, agreed? In fact, it has actually beaten the US S&P 500 index (+15.6%, plus 1.3% in dividends) over one year. However, not all Footsie stocks have done well since February 2021. In fact, some blue-chip shares have performed terribly. Here’s one FTSE 100 share that has crashed spectacularly since early 2021.

Ocado shares explode in 2018-21

Ocado Group (LSE: OCDO) is a technology-driven online retailer founded in April 2000. It teams up with retailers around the world, providing technology and robotics to enable efficient processing of grocery orders. Ocado’s global partners include Morrisons in the UK, Kroger in the US, Sobeys in Canada, and Coles Group in Australia. Ocado listed in London in July 2010 and its shares were one of the FTSE 100’s best performers until 2021. However, despite 22 years of life, Ocado has been heavily loss-making throughout its existence.

Ocado shares floated at 180p and promptly dropped to 160.75p on day one, valuing the group at under £1bn. After lots of ups and downs, the Ocado share price closed at 397.1p at the end of 2017. But then this FTSE 100 stock shot up, ending 2018 at 790p and 2019 at 1,279p. However, in the market boom of 2020-21, Ocado stock exploded to new heights. On 30 September 2020, the shares hit their all-time high of 2,914p, before closing at 2,744p. At this record peak, the Ocado share price was more than 16 times its 180p float price. Wow.

This FTSE 100 share crashed 54% in 12 months

After tumbling in late 2020, Ocado shares rebounded to hit their 2021 high of 2,888p on 3 February 2021, before closing at 2,846p. On 28 January 2021, with the Ocado share price at 2,854p and Ocado valued at £21.4bn, I said, “I would not buy this FTSE 100 share today. For me, Ocado looks like a bubble waiting to burst.” Unfortunately for Ocado shareholders, my prediction was spot on. After rising more than tenfold over five years, Ocado stock went into meltdown.

In fact, over the past 12 months, Ocado shares have been the worst performer in the FTSE 100. Yesterday, Ocado stock crashed as low as 1,140.5p, before closing at 1,225p. As I write, OCDO trades at 1,243p, up 18p (+1.5%) today. This values the group at just over £9.3bn — £12.6bn down from its peak valuation of £21.9bn. So, with Ocado’s valuation slashed, are its shares now in Mr Market’s bargain basement?

I would not buy Ocado today

Over the past 12 months, this FTSE 100 share has collapsed by 54%. It’s also down 30.6% over six months, 19.7% over one month, and 18.3% over one week. Despite these falls, I’m still not tempted to buy Ocado stock today. That’s because the company’s latest full-year results showed slower revenue growth and rapidly rising labour costs. For me, a £9.3bn valuation for a company yet to make a profit in over two decades is simply too rich for my blood. I prefer to invest in large, solidly profitable companies with cheap shares and high cash dividends. But Ocado shares may well appeal to lovers of growth and tech stocks — especially if the tech bubble blows up again in 2022-23.

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.

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons and Ocado 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.

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