1 top FTSE 100 stock to consider buying in April

If recovery and growth gains momentum in this FTSE 100 business as hoped, it could prove to be a decent investment now.

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The retail sector looks interesting right now, and Frasers Group (LSE: FRAS) is a FTSE 100 stock I can’t ignore.

One slight negative is that the Sports Direct tycoon, Mike Ashley, owns the majority of the shares – about 73% of them via his investment vehicle, according to my data provider.

That gives him a lot of control. However, without his business acumen, Frasers wouldn’t be the successful retail-focused empire it is today.

Buying value in the sector

After a shopping spree in the depths of the recent retail ‘winter’, the firm now has investments in other well-known names such as AO WorldN Brown, Currys, ASOS, Boohoo and Hugo Boss, as well as its own Sports Direct and Frasers brands.

One of the main reasons for being interested in Frasers shares now is the likelihood of better general economic conditions ahead. Inflation has been falling, wages have been rising, and the widespread cost-of-living squeeze could be beginning to release.

Perhaps we’ll see ongoing strength in the general retail sector in the coming months and years. If so, Frasers could be well-placed to benefit.

Meanwhile, with the share price near 818p (2 April), the valuation looks undemanding. City analysts expect normalised earnings to improve by almost 13% in the trading year to April 2025. Set against that estimate the forward-looking earnings multiple is running near 8.5, or so.

That compares to a median rolling price-to-earnings ratio for the FTSE All-Share index (for all stocks with estimates) of about 12 – so Frasers may have room to re-rate. However, the firm doesn’t pay a dividend, so that’s something to bear in mind.

A positive outlook

Last December, with the half-year report, Frasers revealed decent trading and delivered an upbeat outlook statement. Chief executive Michael Murray expects further profitable growth for the trading year to April 2025 and beyond.

Meanwhile, shareholders in the company have enjoyed a pleasant ride over the past five years because of the growth of the business. My assumption is there may be more to come if the economy continues to improve.

We’ll find out more from the company soon. The full-year earnings release is due on 15 July. However, I wouldn’t wait until then before diving in with deeper research to explore this opportunity.

The Frasers directors seem to think the company is good value. There’s evidence of that in the company’s ongoing share buyback programme.

Nevertheless, retail’s an industry that’s vulnerable to the ups and downs of the economy. So new shareholders will need to expose their portfolios to that cyclical risk.

It’s common for even the companies themselves to mistime share buy-back programmes. Although that may not be the case here if things go well for the business.

All shares come with risks as well as opportunities. Nevertheless, I think Frasers has the potential to sit well as part of a diversified portfolio of stocks focused on the longer term.

If recovery and growth happens in the business as hoped, Frasers could end up being a decent investment.

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.

Kevin Godbold 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.

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