A dividend stock can boost my passive income stream through consistent dividend payments. One I purchased recently is Centamin (LSE:CEY). Here’s why.

Gold miner

As an introduction, Centamin is a gold mining business that focuses on assets in Africa. Its primary asset is the Sukari gold mine located in Egypt.

So what’s happening with Centamin shares currently? As I write, they’re trading for 86p. At this time last year, the stock was trading for 88p, which is a 2% drop over a 12-month period. In the last three months, Centamin shares are up 19% from 72p to current levels. This has netted me a small return to date.

Why I decided to buy this dividend stock

I weigh up the pros and cons of purchasing any stock after conducting thorough research and due diligence.

Looking at Centamin’s risks to start with, I noted that macroeconomic headwinds could hamper my position in the shares. For example, soaring inflation and the rising cost of materials can hinder any returns. Rising costs for any mining business are a concern as they can eat into profit margins. These same profits underpin returns.

As well as rising costs, Centamin shares could suffer at the hands of the reaction to soaring inflation. In times like this, central banks are raising interest rates in an effort to bring down inflation. This raises the price of the main currencies in the world, such as the US dollar. If this happens, the demand for and value of gold could fall.

Moving on to Centamin’s positives, the current volatility is one of the reasons I added the shares to my holdings. When inflation rises, commodities like gold are often seen as safer, defensive options. This is a trend seen throughout the world recently. Many investors have moved away from traditional stocks in sectors such as tech and finance, and move towards commodities.

Next, as a passive income seeker, I wanted an index-beating dividend stock, so sought out Centamin for returns and growth. At present, the dividend yield stands at 7.8%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9% respectively. I do understand that dividends are never guaranteed, however. In addition to this, the shares look good value for money on a price-to-earnings ratio of just nine currently.

Finally, I noticed that not only does Centamin have a good track record of performance, it has no debt on its books! No debt means more dividends for shareholders like me as well as money for growth initiatives. I am conscious that past performance is not a guarantee of the future, however. Looking back, I noticed that revenue and profit have grown each year for the past four years.

My verdict

I decided to buy Centamin shares for the passive income opportunity. I also wanted to diversify my portfolio with a commodity stock.

Although I don’t expect the current volatility to last forever, demand for gold, as well as Centamin’s fundamentals, including a strong balance sheet, were too good for me to ignore.

The post Here’s why I bought this dividend stock with its juicy 7%+ yield! appeared first on The Motley Fool UK.

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Jabran Khan has positions in Centamin plc. 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.

Some time ago, I made the decision to add FTSE 100 incumbent Auto Trader (LSE:AUTO) shares to my holdings. Here’s why.

Online marketplace for vehicles

Auto Trader is the UK’s leading online vehicle marketplace. Through its website and app, it charges private and commercial sellers to list their vehicles for sale. It started off as a weekly magazine but has evolved as technology adoption has increased.

As I write, Auto Trader shares are trading for 529p. At this time last year, the stock was trading for 575p, which is an 8% drop over a 12-month period. The shares have dropped 20% in the past month from 669p to current levels. I believe this is linked to current economic volatility and fears of an impending recession.

How I decided to buy Auto Trader shares

Starting with the risks linked to Auto Trader shares, I note that a rise in competition in recent years could be a big threat to its market dominance. This is in line with the rise of technology, as well as e-commerce in recent years. This competition could have an impact on the company’s performance and returns.

Next, Auto Trader’s links to the automotive sector are its only source of income. That particular sector is at the mercy of macroeconomic headwinds such as soaring inflation and rising costs. Due to a cost-of-living crisis, consumers may not be in a position to buy new, or sell their current vehicles. This could hinder the uptake of Auto Trader’s offering and impact performance.

So to the bull case of Auto Trader shares. First off, I’m buoyed by its market position. It is the go-to platform in the UK for buying and selling cars. I admit I have used it many times to source my next vehicle, as well as selling a few too. This market dominance should allow it to continue to perform well in the long term.

Moving on to returns, I expect the Auto Trader share price to move upwards, along with the rest of the FTSE 100 index in the longer term. Current volatility will not last forever, in my opinion. This should provide me with some capital returns too. Furthermore, the shares would boost my passive income stream through dividends. At present, the shares dividend yield stands at just 1.5%. I expect this to increase over time too. I am aware that dividends are never guaranteed, however.

Finally, Auto Trader has a good track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has increased revenue in three out of the four years previously. More importantly for me, full-year 2022 revenue surpassed pre-pandemic levels, which is a major positive.

Conclusion

To summarise, I am aware of current macroeconomic issues and understand why the Auto Trader share price is meandering up and down. However, I invest for the long-term, therefore I am not worried or considering selling my shares.

I am buoyed by Auto Trader’s market position, passive income opportunity, as well as recent performance. In fact, if the shares fall further, I may strengthen my position and buy more shares.

The post Here’s why I bought this FTSE 100 stock for returns and growth! appeared first on The Motley Fool UK.

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Jabran Khan has positions in Auto Trader. The Motley Fool UK has recommended Auto Trader. 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.

Due to current economic volatility, some UK shares, including On The Beach (LSE:OTB), are falling. I remember being able to book holidays and travel easily pre-pandemic. For a couple of years, it became difficult due to restrictions and new rules. I sense some normality coming back. Should I buy shares with a view to a longer-term recovery?

Holiday retailer

On The Beach is an online retailer providing consumers with beach holiday packages. It acts as a gateway where customers can reach out to suppliers of accommodation and airline tickets through its multiple brands, via online and telephone channels.

So what’s happening with On The Beach shares currently? Well, as I write, they’re trading for 106p. At this time last year, the stock was trading for 358p. This is a 70% drop over a 12-month period.

UK shares have risks

I believe On The Beach shares will come under further pressure in the coming months due to current macroeconomic headwinds. Soaring inflation has created economic volatility including rising prices for a lot of commodities, including essentials such as food and energy. As a by-product, a cost-of-living crisis has emerged in the UK.

With this in mind, I believe On The Beach could suffer a drop-off in sales as people will choose not to book holidays. Instead, they will be focusing on paying for essentials such as food, and trying to heat their homes.

Why I like On The Beach and what I’m doing now

Let’s take a look at some bullish aspects of On The Beach. Firstly, after a couple of tough years due to the pandemic when it reported losses, it has seen demand increase past pre-Covid levels. This has, in turn, strengthened its balance sheet with some impressive results recently. Its interim report, released in May for the six months ended 31 March, made for good reading. Revenue increased by £12m compared to the same period last year, to £52.9m. Losses narrowed from £21.6m to just £7m. Finally, it managed to record a net cash figure of £14.6m and reduce debt to just £3.65m. This all tells me it has enough liquidity to deal with potential stormy waters ahead.

I try to adopt a buy-and-hold approach, similar to the teachings of investing guru Warren Buffett. He once said, “Our favourite holding period is forever”. I believe the current volatility and falling share price is an opportunity to buy shares in a company I believe will recover in the longer term. My stance comes from the fact there is a newfound appreciation for travelling after the pandemic.

Finally, On The Beach shares look decent value for money after the recent share price fall. They currently trade on a trailing 12-month price-to-earnings ratio of just seven.

Overall, I like the look of On The Beach shares. It is one of a number of falling UK shares that have caught my eye in recent months. I will place it on my buy list for the next time I have some funds to invest to boost my holdings.

The post UK shares: this falling holiday retailer could be a great long-term buy! appeared first on The Motley Fool UK.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended On The Beach. 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.

One growth stock I want to explore in more detail is Water Intelligence (LSE:WATR). Let’s take a look at whether I should buy or avoid the shares for my holdings, with a view to longer-term growth and returns.

Leak detection

The name Water Intelligence nearly fooled me into thinking the business produced smart drinking water. In fact, it is a leak detection business with plenty of years in the industry and international operations across the US, Canada, Australia, Spain, and Belgium.

So what’s the current state of play with Water shares? As I write, they trade for 565p. At this time last year, the stock traded for 1,145p. This is a 50% drop over a 12-month period.

The investment case

Let’s look at some bull aspects of Water Intelligence first. To start with, I’m buoyed by its international presence, which should help boost performance and growth. Drilling down into its specific territories, the piping infrastructure in many of these countries, such as the US and Canada, are ageing. This means that the likelihood of leaks is higher, raising demand for effective and efficient leak detection and repair services. This could serve Water Intelligence’s growth well in the coming years.

Moving onto Water’s performance historically and recently, there is a lot to like for me personally. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years in a row. Coming up to date, last month it released a half-year report for the period ended 30 June 2022 that made for good reading. Revenue and sales increased by 44% and 12.5% respectively compared to the same period last year. Net cash also boosted its balance sheet as that increased too. From a growth perspective, this will boost initiatives, including the fact it hired more technicians as it looks to grow the business moving forward.

So to the bull case. Water Intelligence is still a relatively small fish in a large pond. Despite its international presence, there are larger, more established, and arguably better-equipped rivals out there that could dominate the market. This could negatively affect the performance and growth aspirations of Water Intelligence.

Furthermore, Water Intelligence is at the mercy of current macroeconomic headwinds. These include soaring inflation, the rising cost of materials, and recent international currency exchange volatility. Rising costs could put pressure on profit margins. For any growth stock, profit plays a key part in growing the business. In addition to this, Water’s international presence opens it up to unfavourable international currency exchange rates that could damage its balance sheet.

A growth stock I will continue to monitor

In conclusion, I have decided to keep Water Intelligence on my watch list for now. Current volatility, as well as falling investor sentiment help me come to my conclusion. There are some positives to note, including growth to date, as well as recent performance. For that reason I will keep a close eye on the wider economy in relation to its performance to see if I should change my stance down the line.

The post Should I buy this burgeoning growth stock for long-term returns? appeared first on The Motley Fool UK.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Water Intelligence 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.

One of the primary goals of my investment portfolio and strategy is to boost my passive income stream through dividend stocks. One business that I want to take a closer look at is Pagegroup (LSE:PAGE). Should I buy the shares?

Recruitment business

Pagegroup is an international recruitment business with over 8,000 employees spread across 37 countries. Formed in 1976, it has grown into an industry leader and continues to target expansion. It is split into four core brands and recruits across 25 main disciplines including technology, finance, legal, and HR.

So what’s happening with Pagegroup shares currently? Well, as I write, they’re trading for 375p. At this time last year, the stock was trading for 635p, which is a 40% drop over a 12-month period.

To buy or not to buy?

Let’s take a look at some pros and cons of me buying Pagegroup shares.

FOR: I’m buoyed by Pagegroup’s recent performance. I am aware that past performance is not a guarantee of the future. However, looking back, it has recorded consistent revenue and profit for the past four years. More recently, it released a half-year report last week for the period ended 30 June 2022. I noticed that revenue and profit increased by 27% and 33% respectively compared to the same period last year. The interim dividend was higher than last year. Furthermore, Pagegroup announced a special dividend to reward shareholders. At present, the shares’ dividend yield stands at a mighty 11%. I do understand that dividends can be cancelled, however.

AGAINST: Due to current economic volatility and soaring inflation, confidence in business is falling. Businesses may need to cut costs, which could include hiring freezes. This could impact demand for Pagegroup’s services, and hinder performance and returns.

FOR: On the other side of the coin from potential hiring freezes due to volatility, there is a general shortage of candidates for relevant roles across many sectors throughout the world, especially in developed economies like the UK. This could see Pagegroup experience a rise in demand for its services, and boost performance. In addition to this, the shares look good value for money right now on a price-to-earnings ratio of just seven.

AGAINST: Recruitment is a saturated marketplace. Many firms, of all shapes, sizes, and profiles are vying to fill the same roles and have the best candidates on their books. I will keep an eye on competitors to see how they are performing against Pagegroup.

A passive income stock I will continue to monitor

Taking everything into account, I like the look of Pagegroup shares. It is a global business with a great track record as well as good recent performance. The shares also look good value for money.

What’s putting me off is the current economic volatility and the uncertainty that comes with it. This is the reason I will keep Pagegroup shares on my watch list for now and monitor developments.

The post This 11% yielding stock could supercharge my passive income! appeared first on The Motley Fool UK.

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Jabran Khan 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.

One penny stock that has caught my eye recently is Severfield (LSE:SFR). It has some attractive fundamentals as well as some defensive capabilities, in my opinion. Should I buy the shares for long-term growth and returns? Let’s take a closer look.

Construction steel

As an introduction, Severfield is a steel designer, manufacturer, and installer for large-scale construction projects. Steelworks are essential in a lot of construction as they form the initial structure of any property being built. Severfield is one of the largest firms in its market and has an extensive presence throughout Europe too.

So what’s happening with Severfield shares currently? Well, as I write, they’re trading for 50p, putting them in penny stock territory. At this time last year, the stock was trading for 65p. This equates to a 23% decline over a 12-month period.

A penny stock with risks to consider

I believe the Severfield share price has come under pressure due to macroeconomic headwinds. These include soaring inflation, the rising cost of materials, as well as a global supply chain crisis. All of these challenges could hinder its progress moving forward too. Rising costs eat into profit margins, which can affect investor sentiment and returns. The supply chain issues are impacting many firms and affecting product availability and performance.

With the worldwide economy in a state of volatility, construction projects may be halted, or slowed down at least. This could have a detrimental impact on demand, which would in turn, affect Severfield’s performance and level of return.

The bull case and my verdict

To start with, I believe Severfield has some defensive traits. This is because of the essential nature of its core offering, steel works, and the role steel plays in virtually every construction project. No matter the project, some form of steel is required to help build the initial structure. Steel is as important as bricks and mortar. This should help boost performance and growth for a long time to come.

Next, I can see Severfield shares would boost my passive income stream through dividend payments. At present, the dividend yield on offer is 6%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9% respectively. I am aware that dividends are never guaranteed, however. Furthermore, the shares look decent value for money right now on a price-to-earnings ratio of just 11.

Finally, Severfield has a good track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years consecutively.

Overall I like the look of Severfield shares. I will be adding them to my buy list for the next time I have some funds to invest. The fundamentals, such as performance track record, passive income opportunity, as well as the shares’ value for money look good. Furthermore, I like Severfield’s brand power and global presence. In fact, its exposure to the Indian market, which is experiencing an infrastructure and construction boom, should boost performance and growth in the coming years too.

The post Is this falling dividend-paying penny stock a must buy? appeared first on The Motley Fool UK.

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Jabran Khan 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.

I noticed that FTSE 100 incumbent Smurfit Kappa’s (LSE:SKG) shares have been on a downward trajectory for some time. Could this growth stock, trading at bargain levels, be a good choice for me to boost my holdings with a view to its eventual recovery?

Paper and packaging solutions

As an introduction, Smurfit Kappa is a leading paper and packaging solutions provider with a worldwide presence. It has over 355 production sites and operations in 35 countries throughout the world.

So what’s happening with Smurfit shares currently? Well, as I write, they’re trading for 2,440p. At this time last year, the stock was trading for 33% higher, at 3,684p. I believe macroeconomic headwinds and the tragic events in Ukraine have hampered the shares in recent months.

The investment case

Starting with the bear aspects of Smurfit, headwinds such as soaring inflation, the rising cost of materials, and volatility in the energy market are all playing a part in pushing down Smurfit shares. Rising costs is a credible threat as this means it costs more for Smurfit to manufacture and sell its products. A hike in prices could lead to its customers seeking alternatives. Profit margins are then put under pressure.

In addition to this, the current volatility in the energy sector, and a potential shortage of gas linked to the Ukraine war, led to Smurfit recently stating that a shortage of paper could become an issue. This could hinder performance and returns.

For the bull aspects of Smurfit, I’ll start with the current share price offering great value for money. On a price-to-earnings ratio of just nine, the shares look dirt-cheap. The FTSE 100 average is 15. For a global business with a long history of performance growth and returns, this looks attractive.

Next, Smurfit’s interim results for the half-year ended 30 June were positive. It reported that revenue increased by 36% compared to the same period last year. In addition to this, EBITDA grew by 50%, and it also increased its interim dividend by 8% to 31.6 cents per share. It seems to me the macroeconomic headwinds have not hampered it too much yet.

Finally, Smurfit shares would boost my passive income stream through dividends. At present, the dividend yield is an above index average of 4.35%. I am aware that dividends can be cancelled, however.

A FTSE 100 stock I like but will monitor

To summarise, Smurfit is at the mercy of current volatility. However, its most recent trading update does not show any ill-effects, in my opinion. It is a global business with enticing fundamentals, and great growth prospects linked to the e-commerce boom.

For now, I’ve decided that I want to see full-year results later in the year before I buy Smurfit shares. I will keep Smurfit on my watch list. I have a feeling that the second half of the year could present further challenges linked to recent headwinds. If it can overcome these successfully, which could be displayed in full-year results, I may change my stance.

The post Should I buy this dirt-cheap FTSE 100 growth stock for recovery and returns? appeared first on The Motley Fool UK.

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Jabran Khan 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.

One stock that has been on my watch list for some time now is Telecom Plus (LSE:TEP). I believe it has some defensive capabilities as a utilities provider. With this in mind, could it be a good dividend stock for me to add to my portfolio? Let’s take a closer look.

Utility provider

Telecom Plus, better known under its trading name of Utility Warehouse, is a telecommunications and utilities business that provides a number of services. These include mobile, internet, fixed-line, as well as gas and electricity services. Most of its revenue is generated from electricity services.

So what’s happening with Telecom shares currently? Well, as I write, they’re trading for 2,270p. At this time last year, the stock was trading for 1,206p. This is a 88% return over a 12-month period.

To buy or not to buy?

Let’s take a look at some of the pros and cons of me buying Telecom shares.

FOR: I believe Telecom has excellent defensive traits. The services it provides are mainly essential, especially electric and gas services for consumers to heat and power their homes. In addition to this, internet and telephone connectivity is also pretty much essential in this day and age too. This should help boost performance, as well as keeping returns consistent. Furthermore, Telecom has benefitted from many other firms going out of business due to current issues in the energy sector. It has boosted performance, and customer numbers as a result.

AGAINST: Market volatility is always something I am wary of. The geopolitical events in Russia have led to gas supplies being tightened, and increased demand from many countries to seek resources from different resources. This has led to a spike in prices. I can’t help but wonder if the market eventually normalises, could Telecom find performance and payouts slowing down?

FOR: At present, Telecom’s dividend yield stands at 2.5%. Furthermore, it has a great record of payouts, with the dividend not having been cut since 2006! A dividend stock with such a great record is not easy to find currently, especially after the recent economic volatility, and the pandemic, when many firms cut dividends to conserve cash.

AGAINST: Another concern of mine is the fact that long-time CEO Charles Wigoder stepped down from the business in July. Under his 23-year stewardship, the company experienced growth, consistent returns, and great success. Could his steady leadership be missed moving forward? Only time will tell.

A dividend stock I will continue to monitor

Taking everything into account, I’ve decided to keep Telecom Plus on my watch list for now and continue to monitor developments. I want to see how the new leadership fares in the coming months, as well as monitor the energy market as a whole. Answering my titular question, Telecom is a decent dividend stock, in my opinion. For me, a mixture of uncertainty in the market, the change in leadership, and an average yield put me off. Finally, I believe I can purchase better yielding stocks elsewhere to boost my holdings.

The post Could this defensive business be the ideal dividend stock? appeared first on The Motley Fool UK.

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Jabran Khan 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.

One income stock I will be adding to my holdings imminently is Urban Logistics REIT (LSE:SHED). Here’s why I’m bullish on the shares.

Real estate investment trust

As a quick reminder, a real estate investment trust (REIT) is a business designed to yield income from property. As a rule of thumb, it must return 90% of profits to shareholders in the form of dividends. This is why I already own a few REITs as part of my holdings, with the primary aim of boosting my passive income stream.

Urban specialises in industrial and logistics-style properties to help with ‘last mile’ delivery. It focuses on smaller, single-let industrial properties in key locations throughout the country.

At present, Urban shares are trading for 134p. At this time last year, the stock was trading for 163p. This is a 17% decline over a 12-month period. This share price drop does not concern me. In fact, I view it as an opportunity to buy cheap shares in a stock I’ve had my eye on for some time.

An income stock with challenges to be wary of

Despite my decision to buy Urban shares, I must note bearish aspects which could hamper the shares. Firstly, I believe the share price has been pushed down by economic volatility caused by soaring inflation and rising costs. This is not good news for Urban as many businesses are struggling. This could see them struggle to pay rent to firms like Urban for the use of their properties.

Next, for any income stock, it is worth remembering that dividends are never guaranteed. They can be cancelled at the discretion of the business to conserve cash in times of volatility.

Finally, Urban has a record of acquisitions to grow its portfolio of properties. Acquisitions are great, but they have the ability to go wrong. One common issue is overpaying for a property in Urban’s case. This could have a detrimental impact on returns.

Why I like Urban shares

To start with, I like Urban’s business model and the sector it is currently targeting. E-commerce has exploded in recent years, and there is still a shortage of quality warehousing space for businesses to utilise. Urban specifically targets businesses looking for ‘last mile’ hubs. This should help boost performance and returns for some time to come.

Moving on to Urban’s level of return, the shares current dividend yield stands at an impressive 6%. This is higher than the FTSE 100 and FTSE 250 average of 3%-4% and 1.9% respectively.

Next, due to Urban’s recent share price drop, the shares look dirt-cheap on a price-to-earnings ratio of just over three.

Finally, Urban has a good track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue for the past four years consecutively. It also continues to expand its portfolio of properties for growth purposes.

In conclusion, I believe Urban will serve me well as a good income stock. I do expect some shorter term headwinds due to the current volatility in the economy. Despite this, I buy and hold for the long term, so I am happy to buy the shares and hold on to them for long-term returns.

The post Here’s why I’m buying this income stock for juicy dividends with a 6% yield! appeared first on The Motley Fool UK.

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• How to invest £10,000 to aim for a £6,108 annual passive income

Jabran Khan 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.

I noticed that N Brown Group (LSE:BWNG) shares have been on a downward trajectory for some time. Is the current N Brown share price an opportunity to buy cheap shares? Let’s take a closer look.

Direct home shopping retailer

As an introduction, N Brown is a digital UK retailer specialising in clothing and footwear. It has recognisable brands under its umbrella including Jacamo, and Simply Be. Notably, it has roots stretching back over 160 years and is currently supported by close to 2,000 employees.

So what’s the current state of play with the N Brown share price? As I write, the shares are trading for 21p. At this time last year, the stock was trading for 47p. This is a 55% discount over a 12-month period.

Risks and the reasons behind the N Brown share price fall

I believe N Brown shares have come under pressure in recent months due to macroeconomic headwinds out of its control. Soaring inflation, the rising cost of raw materials, as well as a supply chain crisis have all contributed.

For example, soaring costs can eat into profit margins, which can then impact shareholder returns as well as investor sentiment. Supply chain issues negatively affect day-to-day operations such as product availability. Due to rising inflation, a cost-of-living crisis has emerged. Many consumers have less money to spend on clothing and footwear, as they prioritise food and energy, both of which have risen in price.

Finally, competition in the clothing and footwear market has intensified in recent years. This is linked to the rise of online fast fashion. More traditional retailers, like N Brown, are seeing more competition from companies that are able to make the most of the fast fashion trend and offer cheaper products to consumers.

Positives and my verdict

In terms of the positives, N Brown’s diversified business model is a plus point. It caters for different markets, such as the plus size market, as well as more affluent consumers through its JD Williams brand. The plus size offering, in particular, has risen in prominence in fashion in recent years. In addition, I believe N Brown’s long history sets it in good stead to be able to navigate times of volatility, like now, with useful experience.

Due to the N Brown share price drop, the shares look cheap currently on a price-to-earnings ratio of just over six.

So what about N Brown’s performance? Although I do understand past performance is not a guarantee of the future, I review it to learn more about a business. Looking back, I can see it has recorded consistent, although slightly falling, revenue and profit for the past four years. An interim report released today for the 26 weeks ended 27 August was a mixed bag. Revenue and profit dropped, but on a positive note, debt levels fell, and net cash increased. Both of these will help boost potential growth initiatives, as well as investor sentiment, in my opinion.

To summarise, it is clear to me that N Brown shares are a victim of current volatility. For this reason, I am going to keep them on my watch list for now. I will continue to monitor developments to see if I should change my stance in the near future.

The post Is the falling N Brown share price an opportunity? appeared first on The Motley Fool UK.

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Jabran Khan 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.