The JD Sports Fashion (LSE:JD.) share price has been one of the worst performers on the FTSE 100 in recent times. Since the end of October, it’s fallen 22%. And although it’s recovered since President Trump’s ‘Liberation Day’ announcements in April, it’s now (28 November) trading close to where it was at the start of the pandemic.
Is it now in bargain territory? Could it be a takeover target? Let’s take a look.
Going backwards
A popular method for identifying cheap companies is to use the price-to-earnings ratio. And a look back over the past five years shows JD Sports is going in the wrong direction.
As the sportswear retailer emerged from the pandemic, its stock was valued at 23 times earnings. Of concern to shareholders, it’s fallen every year since, as the table below shows.
| Financial year | Share price (pence) | Adjusted earnings per share (pence) | Price-to-earnings ratio |
|---|---|---|---|
| 30.1.21 | 149.40 | 6.44 | 23.2 |
| 29.1.22 | 188.05 | 12.84 | 14.6 |
| 28.1.23 | 162.75 | 13.39 | 12.2 |
| 3.2.24 (53 weeks) | 117.05 | 12.81 | 9.1 |
| 1.2.25 | 89.12 | 12.39 | 7.2 |
| 28.11.26 | 77.00 (current) | 11.70 (forecast) | 6.6 |
Its P/E ratio is currently below seven. In theory, this means a buyer could get their money back in around seven years.
Admittedly, its earnings per share (EPS) has also been falling. But these things are relative. Recent history suggests that a typical multiple for a UK retailer is around 13. Therefore, it could be argued that a fair valuation for JD Sports is 152p a share – 13 times its forecast earnings for its current financial year.
Some challenges
However, a potential buyer would more than likely want to see earnings growth. And this is where the group has struggled. Although it’s improved its bottom line through acquisitions – most notably buying Hibbett and Courir in 2024 – it hasn’t been able to do this on a per share basis.
The group remains vulnerable to a downturn in disposable incomes both here and in the US, especially among its core demographic of 16-24 year-olds. Tariffs on the other side of the Atlantic are making the products it sells – the majority of which are manufactured in Asia – more expensive for consumers. Following the Hibbett acquisition, the group now has more stores in the US than in any other region.
And this means it’s even more reliant on Nike doing well. With the American sportswear giant accounting for around a half of all JD Sports’ sales, the British retailer will be hoping that the goddess of victory’s turnaround plan will work.
Better times ahead
Looking ahead, the analysts are optimistic. They are expecting EPS growth in FY27 and FY28. If these forecasts are accurate, it means the stock’s trading on only 5.1 times its FY28 earnings.
With such a low valuation, I wouldn’t be surprised if the group became a takeover target. There have been rumours before but nothing concrete. With its relatively clean balance sheet, a potential buyer could part-fund a deal by loading up JD Sports with some debt finance.
Buying a stock because it might become a takeover target isn’t a sensible strategy. But taking a position on the basis that its shares are undervalued — relative to its peers and historical levels — is a better one.
And even though it’s expected to report over £12bn of sales in FY26, there’s still a huge market to go after. McKinsey estimates that the sporting goods industry will increase in size from its current $433bn to $548bn by 2029.
For these reasons, I think JD Sports is a stock to consider.
