At a 52-week low with a P/E of just 7.3 – is this among the best shares to buy now?

Harvey Jones considers if FTSE 100 retailer JD Sports Fashion is one of the best shares to buy today as markets plunge after Donald Trump’s trade tariffs threats.

| More on:

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.

I’m now wondering whether one of the best shares to buy on the entire FTSE 100 is one of its worst performers.

The company in question is JD Sports Fashion (LSE: JD) and I should add a warning here. I bought the stock on three occasions last year and every time the shares only fell further. My bargain hunting efforts have left me nursing a 20% paper loss so far.

I’m not the only one hurting. The JD Sports Fashion share price is down nearly 25% over 12 months and 45% over five years. Quite a comedown for this former FTSE growth hero.

Can the shares fight back?

Margins and sentiment have been squeezed by two disappointing Christmases in a row, troubles at key partner Nike, and Labour’s Budget hikes to employer’s National Insurance Contributions and the minimum wage. 

Currently trading at less than 87p, the stock has just hit a 52-week low. The price-to-earnings (P/E) ratio is a lowly 7.3. That’s roughly half the FTSE 100 average of around 15 times.

Despite my disappointing return, I’m still cautiously optimistic about the company’s future prospects. I don’t have any spare cash right now, otherwise I’d buy more. Will I never learn?

JD Sports shares were creeping up in recent days, but this morning (3 February) they’re down 2.5% as markets digest the latest Donald Trump tariff threat. It’s hardly the only victim. Just four stocks on the index were up at last count.

The retailer has made a big move into the US, after buying Alabama-based athletic fashion retailer Hibbett for about $1bn last spring. The group’s diverse product range includes European brands like Adidas, so it could get hit by tariffs, even if Trump spares the UK.

Its most recent trading update, published on 14 January, showed like-for-like revenue decreased by 1.5% during the nine weeks to 4 January. Lower footfall was only partially offset by a higher average transaction value. Heavy discounting by rivals, particularly during November and Black Friday, hit performance.

I still think it’s a FTSE 100 bargain

JD Sports reported organic revenue growth of 3.4%, with a particularly strong December. Yet it still downgraded profit expectations to between £915m and £935m at most. That’s down from a previous range of £955m to £1.03bn.

I’m impressed by the board’s bold decision to maintain pricing discipline, even in a promotional market. With luck, this should underpin its brand integrity and long-term profitability. It could pay off when market conditions improve. Whenever that is.

JD Sports’ global expansion efforts and strong relationships with key brands also provide a solid foundation for future growth. Unfortunately, everything is up in the air right now.

Buying JD Sports shares is undoubtedly a risk. It’s still a £4.5bn enterprise despite recent slippage, so the glory growth days may never return. The yield is a threadbare 0.7%. Consumers are struggling. Are trainers the force they were?

Yet I’ve noticed that whenever the market shows sign of life, so do JD Sports shares. So yes, I still think it’s one of the very best FTSE 100 shares to consider buying today. The problem is I thought that last year too.

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.

Harvey Jones has positions in JD Sports Fashion. The Motley Fool UK has recommended Nike. 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 Articles

Investing Articles

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »

Mature couple at the beach
Investing Articles

£20k in an ISA? Here’s how it could generate £1 of passive income every hour — forever

With a long-term approach, Christopher Ruane explains how an investor could aim to earn a pound per hour in passive…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

FTSE shares: overpriced or still a bargain?

Christopher Ruane reckons a storming FTSE 100 performance of late doesn't tell us much about whether there are still possible…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Would an investor have made money investing £2k in NIO stock 5 years ago?

Our writer looks at how NIO stock has performed over recent years and weighs the bull and bear cases as…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 steps to start buying shares with £5 a day

In a handful of steps, our writer explains how someone new to the stock market could start buying shares for…

Read more »