This stock rose 98% last year! Could it be a good buy for an ISA?

This Fool wants to increase the number of holdings in his ISA. After its 2023 performance, he likes the look of this stock.

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As we enter the new tax year, I’m on the hunt for the next addition to my ISA. A few candidates stand out.

Two FTSE 100 stocks made the final shortlist, but I’ve opted with Marks & Spencer (LSE: MKS). Let me explain why.

A remarkable recovery

I was initially drawn to the stock by its incredible share price performance. Last year, it rose by 98%. That made it one of the best performers on the Footsie. For context, the index rose by less than 1%.

As I write, a share in the high street stalwart will set investors back 255.7p. That’s 10.7% higher than its price five years ago and 18.9% up from what it opened in 2021. Lately, Marks & Spencer shares have been red hot.

To be fair, it’s not got off to such a hot start in 2024. Year to date, its share price has fallen 7.4%.

An impressive turnaround

But even so, its recovery has been magnificent. And actually, this dip could present a smart time to snap up some shares.

The U-turn the stock has made has been fuelled by one thing: a turnaround in the company’s operations in the last few years.

A couple of years back it seemed to be in the doldrums. Marks & Spencer had enjoyed success in the past but it seemed to be stuck there. Stores were visibly jaded and it lacked a real online presence.

But under CEO Stuart Machin, things have changed. It now focuses on offering more fashionable clothing items as well as selling trendy brands. It has also made good progress in its homeware department.

This seems to be paying off. Its last set of results, which covered the 26 weeks to 30 September 2023, showed that clothing and home sales were up 5.7%. More widely, profit before tax jumped 56.2% to £325.6m.

Fairly valued

The stock trades on around 13 times earnings, which I believe is good value for money. That’s slightly higher than the current Footsie average (11), but below its long-term historical average of 14 to 15.

Room for more?

As such, some brokers have lifted their price predictions for the stock. JP Morgan recently raised its target price to 330p. That represents a 29% increase from its 2 May closing price. The bank also upgraded its rating to an ‘overweight’ (buy) for the first time since 2015, citing “evidence of sustainable share gains” as making the stock “attractive”.

Threats remain

Of course, while the business continues with its turnaround, there are risks.

Retail figures on the whole were positive for the opening few months of the year. But we’re not out of the woods yet. Inflation is still a lingering threat. Consumer’s pockets remained squeezed and, in the months to come, I’d expect this to remain the case.

A good buy?

But it looks like interest rate cuts will occur this year and that should hopefully see spending pick up.

As such, I like the look of its shares. I’m confident the business can keep going from strength to strength. If I had the cash, I’d open a position in my ISA.

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.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough 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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