1 FTSE 100 stock down 35% that is a screaming buy

Jabran Khan details a FTSE 100 stock he currently owns and explains why he is adding more shares to his holdings amid a 35% share price drop.

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JD Sports (LSE:JD) has seen its share price drop recently. I currently own shares in the FTSE 100 incumbent and feel at this lower price, there is an excellent opportunity to buy further shares for my holdings.

Retail giant

Retail stocks have experienced mixed fortunes in recent years. The shift from the high street shopping experience to online fast fashion and changing shopping habits have meant many retailers have fallen by the wayside.

JD Sports has been bucking that trend for many years, in my opinion. It is currently one of the premier sportswear and athletics brands in the UK and possesses a store presence throughout the UK and abroad. It has also diversified its interests including a gym brand too.

JD Sports was promoted to the FTSE 100 index in 2019 and I believe it firmly belongs on the UK’s premier index. Its performance and growth story from its humble beginnings are remarkable, in my opinion.

As I write, JD shares are trading for 151p. In November, the shares were trading for 233p which is a 35% drop across a four month period. It is worth noting that this time last year, the shares were trading for 163p. Rising costs as well as the supply chain crisis have placed pressure on the shares. 

FTSE 100 stocks have risks

The primary risks facing JD Sports are the current rising costs, supply chain crisis, and competition.

Rising costs have been squeezing the margins of many businesses across plenty of sectors. JD Sports has been affected. The issue here is that unless increased costs are passed to customers, revenue, profit, and investor returns could be affected. Furthermore, supply chain issues globally could also hamper performance.

JD Sports currently operates in a high growth market and there are many competitors vying for market share. JD could see market share lost to online fast fashion competitors, which could affect performance and investment viability.

3 reasons I’m buying more JD shares

Firstly, JD has an excellent record of profit growth and overall results year on year, aside from the Covid-affected 2021 results. I do understand that past performance is not a guarantee of the future, however. Analysts believe the FTSE 100 incumbent will return to profitability following Covid-related issues. An earnings increase of over 80% is expected for the year just ended in January 2022, and then more modest rises of 2% and 7%, respectively, for the current and next years.

Next, at current levels, JD Sports shares look cheap to me. It sports a price-to-earnings ratio of just 16. It is worth noting that this is substantially lower than pre-pandemic levels which were well over 20.

Finally, JD Sports has one eye on growth despite macroeconomic challenges noted. It calls itself the ‘undisputed king of trainers’ but I’d call it the ‘undisputed king of retail’ in the UK. As part of its growth plans, it is looking to aggressively expand its store network in key locations internationally. I believe this will help boost performance in the longer term.

Overall, I believe JD Sports is one of the best stocks on the FTSE 100 index. At current prices, the shares scream opportunity to me. I will be adding further shares to my holdings at this new lower price before it inevitably rises, which I believe it will.

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.

Jabran Khan owns shares in JD Sports. 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.

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