25% below their high, I think these FTSE 100 shares could climb in 2024

These FTSE 100 shares are significantly down in price, and our writer thinks this could present a perfect buying opportunity for him.

| 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.

Lady wearing a head scarf looks over pages on company financials

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

In my opinion, JD Sports Fashion (LSE:JD) is up there with the strongest FTSE 100 shares.

When I reviewed the financials, I was immediately taken aback by the great margins and revenue growth.

So, I decided to delve deeper and look at what caused the recent decline. I also wanted to get to know the company’s operations better and look at making an investment decision.

What caused the price decline?

The shares started falling in 2021, declining nearly 60% between 19 November 2021 and 14 October 2022.

The price has risen almost 80% since the bottom. That speaks volumes to me about the quality investors must be recognising in the company.

I think the prime reason for the price decline was the difficult economic environment, not only in the UK but abroad, too. This is particularly true as the organisation has a global presence:

Source: JD Sports Fashion Annual Report 2023

High interest rates and inflation likely drove away customers and investors. These economic conditions also would have increased the costs of operations.

In the UK, the cost-of-living crisis has also been challenging for JD Sports Fashion as the general public has tightened spending on items not deemed vital, like new designer sports clothing.

However, the company managed to maintain revenue increases despite these challenges. It reported £8.6bn of revenue in 2022 and £10.1bn in 2023.

The real issue around 2021 was a reduction in net income, a signifier of poor profitability for the company. This is usually due to increased product and service costs, internal management, and operational expenditures.

Source: TradingView

Where could it go from here?

JD Sports Fashion have made some strong collaborations and acquisitions recently. It purchased DTLR Villa and Shoe Palace and took an 80% stake in Cosmos Sport, all streetwear retailers. It also partnered with Excel Esports, embracing e-gaming audiences. I think these operations could positively impact the share price.

For me, one of the most significant risks to consider when making an investment right now is the price-to-earnings ratio, which is 44. However, based on future earnings estimates, that comes down to just 11. That could signal an opportunity for me. What most people are worried is overvalued now could, in fact, shift when future earnings hit home. Of course, future earnings estimates might fall short, which could negatively impact the shares.

Another area I’m watching carefully is a significant level of debt from the pandemic, which has increased since then from £2bn in 2020 to £2.5bn in 2023.

But, the company has a solid operating margin of nearly 9%, which has expanded over time.

And, with a 10-year average annual revenue growth rate of almost 26%, I have to admit this is a high-growth enterprise selling at a very low price. For that reason, I think the shares are set to climb in 2024.

To buy or not to buy?

I’m slow when it comes to buying new companies. JD Sports Fashion has been on my radar for a while, but it’s too soon for me to make a judgement call.

I’ll likely go through my portfolio soon and sell off some of the shares I don’t think are worth owning anymore.

Then, I could easily see myself buying shares in this excellent sports fashion conglomerate.

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.

Oliver Rodzianko has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Here’s the best-performing FTSE 100 stock of the last 10 years

Private equity firm 3i has outperformed the rest of the FTSE 100 over the last 10 years. And its big…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

Here’s why Warren Buffett is selling shares (and why I’m not)

Warren Buffett cited tax considerations as his reason for selling shares in Apple. But this isn’t something most UK investors…

Read more »

Investing Articles

What on earth is going on with the AstraZeneca share price?

The AstraZeneca share price has fallen 30% from its peak in August. Dr James Fox explains what’s going on with…

Read more »

Investing Articles

2 high-yield FTSE 100 shares I’d consider buying for passive income…and one I’d avoid

Some FTSE 100 stocks have eye-popping dividend yields. But will the passive income actually be dished out? Paul Summers takes…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 former stock market darlings are trying my patience! Time to sell?

Harvey Jones thought he was getting a bargain when he snapped up these too much-loved FTSE 100 dividend growth stocks.…

Read more »

Investing Articles

Here’s how I’d use £3,000 to target a second income that grows each year

Our writer explains the approach he'd take to trying to build a second income that gets bigger over time, by…

Read more »

Elevated view over city of London skyline
Investing Articles

Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year…

Read more »

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

This FTSE 100 share has just crashed another 20%. Its P/E is now just 9.9 so should I buy?

Harvey Jones was tempted to buy this FTSE 100 share after it crashed in October. Now it's crashed again, it…

Read more »