I think this could be the worst-performing FTSE 250 stock in 2025

Jon Smith explains why he believes a FTSE 250 company with a share price already falling could get even worse in the coming year.

| 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.

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.

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.

Even though the FTSE 250 at an index level gained during 2024, this doesn’t mean all stocks on its platform did. Some performed poorly, which could continue in 2025. Here’s one share that’s been flashing red flags at me to end the year.

Recruitment in focus

I’m talking about SThree (LSE:STEM). The share price for the stock’s down 33% over the past year. Let’s first run through what the business does and how it makes money.

SThree is a multinational recruitment company that specialises in headhunting for STEM (science, technology, engineering and mathematics) industries. By placing candidates at companies, it generates placement fees.

Should you invest £1,000 in JD Sports right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports made the list?

See the 6 stocks

The recruitment model has been proven over many decades. I don’t dispute that. But for SThree, a recent profit warning flagged several reasons why now might not be the best time to invest.

Created with Highcharts 11.4.3SThree Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Worrying factors

The specific trading update mentioned that group net fees for the full year would be down 9% versus last year “against the backdrop of ongoing challenging market conditions”.

Another factor for poor performance was the “increased political and macro-economic uncertainty”, which SThree said slowed down decision making when it came to new hires.

Finally, there were further concerns as the “labour market is undergoing changes driven by new technology and new ways of working“.

Unfortunately, I think all of these factors are going to persist into 2025. For example, the increase in political uncertainty. Germany and France will likely have new elections next year. The US inauguration will happen in late January. There’s plenty of scope for issues relating to politics spilling over for SThree.

When it talks about changes to the labour market with new technology, part of this is likely referring to some human jobs being cut due to artificial intelligence (AI) use instead. If this trend continues (I think it will) then SThree will generate lower revenue due to less hires needed.

A cheap consideration

It doesn’t surprise me that the share price dropped substantially based on this recent update. Yet even with that reduction, I still think it has further to fall next year.

Some will disagree with me. The fall in the stock has meant the price-to-earnings ratio’s now just 6.63. This could indicate that it’s undervalued in comparison to my fair value benchmark of 10. Further, SThree has a good spread of placement fees around the different sectors. So even if technology suffers, the other areas could help to offset this slack.

Even with these points, I’m still concerned that the reasons being flagged as a cause for concern right now are only just beginning. With the rise of AI, heightened political issues and general challenging conditions for recruitment, 2025 could make things a whole lot worse.

On that basis, I’m staying well away and feel it could be a really poor performer over this period.

Should you invest £1,000 in JD Sports right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports made the list?

See the 6 stocks

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.

More on Investing For Beginners

Investing Articles

2 cheap FTSE 100 and FTSE 250 shares to consider for an ISA before 5 April!

These FTSE 100 and FTSE 250 shares are on sale today! Here's why long-term Stocks and Shares ISA investors should…

Read more »

Investing Articles

How I’m building a new second income for 2035

Millions of us invest for a second income. Here are the steps Dr James Fox is taking in order to…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Investing Articles

3 top FTSE 100 shares to consider for a new ISA

The FTSE 100 is packed with top-notch companies that can form the building blocks of a quality Stocks and Shares…

Read more »

Investing Articles

Is buying gold stocks the best way to capitalise on bullion’s bull run?

Forget about gold bars, coins, and funds for a moment. Here's why considering gold stocks could be the best option…

Read more »

Investing For Beginners

Want to invest in an ISA but scared of a stock market crash? Consider this

A stock market crash or dip can be a great time to buy FTSE 100 stocks at reduced prices. Harvey…

Read more »

Investing Articles

1 crucial thing to do as the 2024/25 ISA deadline approaches

This time of year is a great time to check your ISA strategy and make sure you’re positioned for long-term…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

How much would an investor need in a Stocks and Shares ISA to generate £20k a year in passive income?

Edward Sheldon calculates how much one would need to generate a chunky annual passive income with dividend stocks. And it…

Read more »