These FTSE 100 shares have crashed to 52-week lows. Can I resist buying them?

The share prices of some of our biggest companies are really struggling. But should these FTSE 100 stocks now be considered bargains?

| More on:
Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey 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.

Investors in some FTSE 100 stocks can’t catch a break. In fact, the fragile economic and geopolitical environment has now pummelled the share prices of a fair number of our biggest companies to 52-week lows.

Today, I’m looking at three examples and asking whether any are too cheap to resist.

Weak demand

Specialty chemicals manufacturer Croda International (LSE: CRDA) is having an exceedingly poor 2023 with the stock down nearly 40%.

Is the drop overdone? Possibly. This company possesses a strong balance sheet and a history of generating above-average margins. Croda also has a good track record when it comes to hiking its annual dividends, even if the current yield (2.5%) isn’t particularly chunky.

Then again, the recent cut to its annual profit outlook due to lower demand across its businesses is rather concerning. Adjusted pre-tax profit of £300m-£320m is now expected, down significantly from £370m-£400m.

Taking this into account, a price of 24 times FY23 earnings for the shares still looks steep.

On the other hand, this is lower than Croda’s five-year average price-to-earnings (P/E) ratio of nearly 31. So, maybe the stock is more of a bargain than it looks.

Given just how huge that reduction in guidance was, however, this firm goes on my watchlist for now. If I were to eventually buy, it may be psychologically easier to build a stake gradually.

Great value?

Investment platform provider Hargreaves Lansdown (LSE: HL) is another FTSE 100 company in a spot of bother. Despite the odd fleeting burst of positive momentum in the last year, shares have hit a fresh 52-week low.

This makes sense. Regardless of how well it has scored on quality metrics in the past, the abundance of bearishness in the markets was never going to be good for business or sentiment.

The recent trading statement bears this out. Growth in client numbers in Q1 was negligible, if understandably so.

On the flip side, I firmly believe that an ageing UK population will serve as a long-term growth driver for Hargreaves as more of us seek to get our savings in order. While the £3.3bn cap isn’t short of competition, that bodes well for a recovery.

It might not be a comfortable ride initially but a P/E of 11 (compared to a five-year average of 26) is very enticing too.

I may not be able to resist this one.

Profit warning

A third stock hitting a 52-week low recently is B&Q owner Kingfisher (LSE: KGF).

Again, this really doesn’t come as a surprise. While the company enjoyed a purple patch during lockdowns, it’s inevitable that some DIY and gardening projects are put off during a cost-of-living crisis. Tellingly, annual profit is now expected to be 7% lower than previously predicted.

Is a lot of negativity priced in? A P/E of just under nine certainly feels cheap at face value. The 5.9% dividend yield also packs a punch for income investors.

However, I’m still wary. With inflation recently coming in slightly higher than expected, the risk/reward trade-off here still looks unfavourable. Knowing that the company is the third-most shorted stock in the UK market (two places higher than Hargreaves Lansdown) is hardly encouraging either.

I’m steering clear until I see clear evidence that momentum has reversed.

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc and Hargreaves Lansdown Plc. 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

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

If I could only buy 2 FTSE 100 dividend shares in December, it would be these!

I think these FTSE 100 income shares are brilliant stocks to buy for these uncertain times. Here's why I'll buy…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Best British growth stocks to consider buying in December

We asked our freelance writers to reveal the top growth stocks they’d buy in December, which included retailers and real…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could buy just one FTSE stock right now, it would be this high flyer!

Mulling over the choice of only buying one FTSE stock, Sumayya Mansoor explains why she would choose this discount retailer.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

8% or 4%? Is one dividend yield twice as good?

When it comes to income shares, could less be more? This writer considers the role of dividend yield in his…

Read more »

British Pennies on a Pound Note
Investing Articles

I’m eyeing this passive income machine for my SIPP in December!

A double-digit dividend yield is not the only thing that has grabbed this writer's attention when it comes to considering…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

One undervalued growth stock I’m eyeing up ahead of 2024!

This growth stock caught the eye of our writer. She breaks down its investment viability as she looks to start…

Read more »

Investing Articles

3 reasons the BP share price could surge in 2024

Stephen Wright outlines why resilient oil prices, lower inflation, and the avoidance of a global recession could send the BP…

Read more »

Investing Articles

Could buying these 3 AI shares be like investing in Tesla in 2010?

I wonder if investing in these three AI stocks could match the meteoric rise in the value of Tesla shares…

Read more »