Down 86%, could this FTSE growth stock blow up like the Rolls-Royce share price?

Paul Summers remains bowled over by the progress of the Rolls-Royce share price. Could a similar recovery play out in another UK stock that’s fallen on hard times?

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It goes without saying that the Rolls-Royce (LSE: RR) share price has been in magnificent form for a while. Go back four years and I could have picked up the stock for just under 40p a pop in my lockdown-induced haze. Fast-forward to when I’m typing this and the price sits close to 530p.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I tip my Foolish hat to anyone who managed to ride this incredible recovery. I’m also asking whether there’s a chance of another FTSE stock rising from the ashes in a similar fashion.

Share price crash!

In almost a complete reversal of fortunes, Ocado (LSE: OCDO) holders have had a very bad last four years. At roughly the same time as Rolls-Royce was on its knees, the share price of the online grocer and logistics provider sat at a record high thanks to a purple patch of trading during the pandemic.

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Created with Highcharts 11.4.3Ocado Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

In case you weren’t aware, Ocado’s share price is now down 86% since those heady days. That’s the sort of movement we might expect from a penny stock!

Rolls-Royce has fared far better thanks in part to travel demand getting back to normal and more planes (running on its engines) being in the sky.

In contrast, sentiment in Ocado dropped off as shopping habits returned to normal. More recently, investors haven’t welcomed news of a slowdown in the rollout of its robot-filled Customer Fulfilment Centres for retail clients.

Lost cause?

I think it’s wrong to assume that any share price — including that of Ocado — is doomed to move sideways (or worse) going forward. We simply don’t know for sure. And nor do those brainy folks in the City.

In fact, some of company’s most recent updates have been positive. For example, the stock shot up in September after management raised forecasts on full-year revenue following a 15.5% jump in its latest quarter as customer numbers grew. The firm’s joint venture with Marks & Spencer is now expected to deliver low double-digit percentage growth. Previously, it was anticipated to be a mid-to-high single-digit percentage.

As an aside, the Rolls-Royce recovery must surely slow at some point. Its stock now changes hands at a (very) frothy forward P/E ratio of 30!

Buyer beware

On the other hand, I remain wary of any £3.2bn business that, according to its chief financial officer, won’t be posting pre-tax profit for another four or five years!

It seems I’m not alone. Ocado is currently the third-most shorted stock on the UK market. Put another way, quite a few traders are betting the shares have further to fall.

There’s a chance they could be wrong and a rush to close their positions would turbocharge the share price. But it’s hardly the most encouraging sign.

For now, there appears to be no interest in Rolls-Royce from short sellers.

I’m not holding my breath

Taking the above into account, I’d be surprised if a recovery to match that seen in the FTSE 100 stock were to play out here. In my view, there are far more promising turnaround candidates lurking elsewhere in the UK stock market. Some of these might even pay dividends while I wait.

Ocado’s still not for me.

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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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce 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.

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