UK shares: this falling holiday retailer could be a great long-term buy!

Some UK shares are currently trading at bargain levels and this Fool notes one stock that could recover in the longer term.

| 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.

Young Caucasian girl showing and pointing up with fingers number three against yellow background

Image source: Getty Images

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.

Due to current economic volatility, some UK shares, including On The Beach (LSE:OTB), are falling. I remember being able to book holidays and travel easily pre-pandemic. For a couple of years, it became difficult due to restrictions and new rules. I sense some normality coming back. Should I buy shares with a view to a longer-term recovery?

Holiday retailer

On The Beach is an online retailer providing consumers with beach holiday packages. It acts as a gateway where customers can reach out to suppliers of accommodation and airline tickets through its multiple brands, via online and telephone channels.

So what’s happening with On The Beach shares currently? Well, as I write, they’re trading for 106p. At this time last year, the stock was trading for 358p. This is a 70% drop over a 12-month period.

UK shares have risks

I believe On The Beach shares will come under further pressure in the coming months due to current macroeconomic headwinds. Soaring inflation has created economic volatility including rising prices for a lot of commodities, including essentials such as food and energy. As a by-product, a cost-of-living crisis has emerged in the UK.

With this in mind, I believe On The Beach could suffer a drop-off in sales as people will choose not to book holidays. Instead, they will be focusing on paying for essentials such as food, and trying to heat their homes.

Why I like On The Beach and what I’m doing now

Let’s take a look at some bullish aspects of On The Beach. Firstly, after a couple of tough years due to the pandemic when it reported losses, it has seen demand increase past pre-Covid levels. This has, in turn, strengthened its balance sheet with some impressive results recently. Its interim report, released in May for the six months ended 31 March, made for good reading. Revenue increased by £12m compared to the same period last year, to £52.9m. Losses narrowed from £21.6m to just £7m. Finally, it managed to record a net cash figure of £14.6m and reduce debt to just £3.65m. This all tells me it has enough liquidity to deal with potential stormy waters ahead.

I try to adopt a buy-and-hold approach, similar to the teachings of investing guru Warren Buffett. He once said, “Our favourite holding period is forever”. I believe the current volatility and falling share price is an opportunity to buy shares in a company I believe will recover in the longer term. My stance comes from the fact there is a newfound appreciation for travelling after the pandemic.

Finally, On The Beach shares look decent value for money after the recent share price fall. They currently trade on a trailing 12-month price-to-earnings ratio of just seven.

Overall, I like the look of On The Beach shares. It is one of a number of falling UK shares that have caught my eye in recent months. I will place it on my buy list for the next time I have some funds to invest to boost my holdings.

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 has no position in any of the shares mentioned. 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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »