This fallen FTSE 250 darling could be the best share for me to buy now

Jon Smith outlines how the start of a transformation at a beaten-down FTSE 250 company could make it a great time for him to buy.

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Over the past three years, the St James’s Place (LSE:STJ) share price has halved in value. In fact in Q2, it hit the lowest level in over a decade. Yet the FTSE 250 firm’s managed to rally 32% in just the past three months, with some indications that the worst is in the rear view mirror. Here’s why it could be a smart purchase for me right now.

Taking action

One catalyst that’s helped the stock to rally was the half-year results released at the end of July. It was the first real opportunity for the management team to express how they were planning on turning the business around.

In the report, it spoke of “an addressable cost base reduction programme”. This is anticipated to give cumulative net savings of around £500m through to 2030. The results also spoke about taking a chunk of these savings to invest for “strategic initiatives and underpinning long-term growth ambitions.”

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These comments clearly helped to give investors more optimism about the future. Part of the issue for some firms is that the management team doesn’t accept there’s a problem. Therefore, things never change. Yet the fact that action’s being taken shows that the falling share price can be addressed.

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Loyal client base

Another factor that makes me want to buy the stock is the type of clients the firm has. Despite all the problems over the past few years, the funds under management hit a new record at £181.9bn in H1 2024. This is up from the £168.2bn from the end of December 2023.

The more money from clients the company looks after, the more profitable it can become. Sure, the client advisers have to sell financial products in order to turn that money into revenue. But I’m impressed at how the company’s retained a lot of clients through a difficult period. Not only this, but it’s actually increased the funds being managed.

This shows me that clients do like the offer. Otherwise they would quickly move money elsewhere.

Caution needed

Despite these positive points, I do need to be mindful of the issues that got the company in a pickle in the first place. One of the major ones was the £426m compensation pot set up earlier this year for historical overcharging of client fees.

The fact that the systems and policies didn’t pick up on the correct fees that should have been charged is worrying. Of course, the firm’s addressing this issue. But it’s embarrassing that something like this was happening internally without it being picked up for a long time.

I’m seriously thinking about buying the stock for long-term gains and feel it represents one of the best potential growth options right now.

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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.

Jon Smith 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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