With the FTSE 100 trading close to record highs, some of the UK’s largest companies are starting to look quite expensive to me.

As a long-term investor, I’m looking for stocks with the potential to beat the market over long periods. For me, that sometimes means following Warren Buffett’s example and buying shares in good businesses that are temporarily out of fashion.

I reckon I’ve found two FTSE 100 stocks that could fit the bill perfectly.

Quality at a bargain price?

Sports fashion footwear retailer JD Sports Fashion (LSE: JD.) has seen its share price halve over the last two years. But the group’s profits have risen over the same period. I think there’s a real chance the shares are now simply too cheap.

Since its flotation on the London Stock Exchange in 1996, JD Sports has built a fearsome reputation for growth through both store openings and acquisitions. The group now has more than 3,300 stores worldwide, largely split across the UK, Europe, and US.

Growth stumbled in 2021 when the pandemic hit store sales and the share price hasn’t yet recovered. However, the group’s business has continued to grow.

Sales rose by 10% to £11.5bn during the year to 1 February 2025. While adjusted pre-tax profit fell by 4% to £923m due to rising costs, the business still generated an attractive 18% return on equity.

Some investors worry that JD Sports will lose market share as key brands such as Nike focus on selling direct to consumers. I can’t rule out that risk. But with the shares trading on just six times 2025/26 forecast earnings, I reckon the shares are already priced for bad news.

Analysts have an average price target of 114p on JD Sports shares – 50% above the share price at the time of writing.

I think this could be a good time to consider investing. I already have enough exposure to UK retail in my portfolio. But if I didn’t, JD Sports is definitely a stock I’d consider.

A high-class operator

Bunzl (LSE: BNZL) is a company I’ve admired for much of my time as an investor. This global business supplies millions of boring-but-essential items such as cleaning products and food packaging to customers all over the world.

Bunzl shares have often looked expensive to me, and I’ve somehow never invested. But that situation may have changed, after the company issued a rare profit warning in April.

Management blamed the downgrade on softer demand in North America and problems rolling out a range of own-branded products. Bunzl’s share price is now a third lower than it was at the start of the year, but I think the shares may now have fallen too far.

This stock is now trading on just 13 times forecast earnings, with a 3.2% dividend yield. These figures are unusually cheap for Bunzl. My research suggests the last time the business traded at this valuation was in 2011.

My main concern is that the problems highlighted in April may take longer to solve than expected. To offset this risk, I might invest in stages, opening a small position initially.

However, Bunzl is actively on my radar as a stock to consider buying when I next have funds available to start a new position.

The post The FTSE 100 is at record highs, but these stocks still look cheap to me appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl Plc and 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.

Shares in oil and gas giant BP (LSE: BP) have fallen by 25% over the last year, leaving this FTSE 100 stalwart with a tempting 6.6% dividend yield.

However, while BP has long been popular with UK investors seeking income, the company doesn’t have a perfect record in this area. The dividend was cut in the wake of the Deepwater Horizon disaster in 2010, then again when oil markets crashed in 2020.

BP is also under pressure again at the moment. First-quarter profits slumped, and industry analysts are starting to wonder if a spell of lower oil prices could turn into a deeper energy market slowdown.

Some investors are concerned about the group’s strategy. Under pressure from activist investor Elliott Management, BP CEO Murray Auchincloss announced a “reset strategy” earlier this year. He hopes to boost profits by pumping up oil and gas production and scaling back spending on renewables.

BP looks like an underdog in this sector right now. But if Auchincloss can pull off a turnaround, I think the shares could offer good value at current levels.

What are City analysts saying?

Expert City analysts follow large companies like BP in huge depth. They model cash flow and profits under different circumstances to produce estimates of future earnings and dividends.

While these forecasts are certainly not foolproof, I find them useful as a measure of current expectations. In this case, I’m particularly interested in City forecasts for BP’s dividend.

Here are the latest estimates for the next three years:

BP has previously said it plans to maintain dividend growth of at least 4% per year. The company has also said the dividend should remain affordable down to an oil price of $40 per barrel – well below the mid-$60s prices in the market at the moment.

City analysts seem to be on board with this story, suggesting BP’s dividend could remain safe.

Buy BP for a recovery?

I reckon BP could be worth considering at current levels. But I can see a couple of risks.

If energy prices continue to fall, I think its finances could become much tighter. BP might be able to protect its dividend, but this could limit its ability to invest in new projects to support long-term growth. That could leave the company lagging behind rivals in the future.

For me, a second risk is that BP didn’t take the opportunity to cut its debt levels enough when oil and gas prices (and profits) were much higher.  

BP’s net debt actually rose by $4bn to $27bn during the first quarter of this year. Some of this may reverse during the year, but Auchincloss’s goal of cutting net debt to $14bn-$18bn by the end of 2027 doesn’t look easy to me.

Auchincloss is planning to raise cash by making disposals, potentially including the Castrol lubricants business. This could be a practical solution. But selling assets for a good price is likely to get harder if energy prices continue to fall.

I can’t help feeling that BP is at the mercy of external events at the moment, rather than being in charge of its own destiny. For this reason, I’ll stay on the sidelines for now.

The post 6.6% yield? Here’s the dividend forecast for BP shares to 2027 appeared first on The Motley Fool UK.

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Roland Head 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.

Investors looking for reliable passive income often focus on big FTSE 100 companies. Some of these giants can certainly be a good source of dividends. But the UK market’s also home to a number of smaller companies with a strong reputation for income.

Here, I’ll highlight three small-caps offering dividend yields of 6% or more – including two stocks from my own portfolio.

A recovery story?

Epwin (LSE: EPWN) produces housebuilding products such as doors, windows, cladding and decking. The last couple of years have been tough, due to slower conditions across the UK’s housing market. Fortunately, Epwin has remained profitable and in good financial health through this period, recently reporting increased annual profits.

The risk is that conditions could remain weak or even worsen if the UK suffers a recession. However, I think the picture could be improving. Recent government data showed a 17% increase in shipments from UK brick factories during the first quarter of this year.

Builders may order bricks for a new home before they order doors and windows. But if more bricks are being sold, I reckon there’s a good chance that more doors and windows will be needed over the next 12 months.

Epwin currently trades on eight times forecast earnings, with a 6% dividend yield. I reckon that’s worth considering.

A niche business yielding 8%

Currency management expert Record (LSE: REC) isn’t a household name. Some of its largest customers are Swiss pension funds. In total, the company’s customers trust it to provide currency hedging and related services for more than $100bn of underlying investments.

We can get an idea of the value attached to its services by looking at its accounts. Last year, Record reported a 27% operating margin, generating a return on equity of more than 30%. These excellent figures are fairly typical for this business.

When a company can consistently generate this kind of profitability, my experience is that it usually offers a service its customers value highly.

Perhaps the main risk is that historic growth has often been slow and inconsistent. Recent performance has improved, but there’s no guarantee this will continue. However, Record’s 8% dividend yield looks safe to me. It’s also high enough for me to be relaxed about the risk of slow growth.

A 9.9% yield!

Sabre Insurance (LSE: SBRE) is a niche operator in the UK motor insurance market, focusing on higher-risk drivers and lines such as motorcycle and taxi insurance.

The advantage of this model is that Sabre’s less exposed to competition from price comparison and large brands. The firm’s customers require more skilled underwriting, but profit margins are higher to reflect the extra risk.

As a potential investor, my main concern is that the company’s core market is relatively small. One area currently being targeted for growth is to offer cheaper insurance to less risky drivers, while also accepting slightly lower profit margins. This could work well – but there’s a lot more competition in this area, so careful judgement will be needed.

Broker forecasts for 2025 show Sabre with a dividend yield of 9.9%, covered by earnings. This business looks interesting to me and is on my list for further research. I think it could be worth considering for passive income.

The post 3 super small-caps with 6%+ yields to consider for passive income appeared first on The Motley Fool UK.

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Roland Head has positions in Epwin Group Plc and Record 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.

I’ve been hunting through the UK market for cheap dividend shares with above-average income yields. Here are two stocks that are on my radar.

Poised for a recovery?

FTSE 100 advertising group WPP (LSE: WPP) has faced some tough times over the last few years.

A global slowdown in spending on advertising and marketing has hit profits hard in recent years. Tariffs could also hit some of WPP’s larger customers.

WPP’s share price has now fallen by nearly 50% in three years. But advertising has always been a cyclical business, and I think a recovery is likely at some point.

In the meantime, the firm’s shares are starting to look unusually cheap to me. Broker forecasts price WPP shares on less than eight times forecast earnings, with a useful 6% dividend yield.

Cash generation has remained healthy, and the dividend still looks affordable to me as long as debt levels remain under control.

My main concern is probably that the growing importance of AI and online advertising could make it hard for WPP to return to past levels of growth and profitability. The company has expanded its digital capabilities in recent years, but investors are still waiting for a return to growth.

Buying contrarian or unloved shares requires investors to go against the trend. WPP is one stock where I think this is worth considering, especially for investors who are looking for income.

A renewable power play

North Yorkshire-based Drax (LSE: DRX) is best known as the owner of the UK’s largest power station, providing 5% of the nation’s electricity.

This used to be a coal-fired business, but the company’s big burners now rely on biomass, or wood pellets. This fuel is officially classified as renewable and attracts government subsidies, boosting Drax’s profits.

The obvious risk is that government policy on biomass support is not exactly predictable. Earlier this year, Drax agreed a new deal with the government to support its operations between 2027 and 2031.

This should allow it to keep operating when its current subsidy deal expires. But the new deal is said to be significantly less generous than the old one, so future earnings from biomass generation could fall.

Drax CEO Will Gardiner is not blind to this risk. He’s been adding other types of electricity generation to the group’s portfolio. The company’s assets now include hydroelectric power and battery storage.

Three new gas-powered turbines are also expected to start operation later this year, providing up to 900MW of additional capacity. They’ll be used to help keep the grid balanced alongside more variable renewable suppliers, with contracts already in place “worth over £250 million”.

Uncertainty over future earnings potential is weighting on Drax’s share price. Broker forecasts suggest profits could fall by 40% in 2026, compared to 2025. However, even these downbeat forecasts leave Drax trading on a modest P/E of 9, with a 5% dividend yield.

My guess is that the UK may continue to need Drax’s power generation even after 2031. If profits stabilise at 2026 levels, I think the shares could be too cheap right now.

For investors seeking opportunities among utility stocks, I think Drax is worth considering.

The post 2 cheap UK dividend shares to consider buying in May appeared first on The Motley Fool UK.

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Roland Head 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.

The FTSE 100‘s up by nearly 5% in 2025. However, investors who tapped into some key trends earlier this year have already enjoyed much bigger gains.

The top three risers in the FTSE 100 this year have all risen by more than 50%.

A long-term winner?

Defence contractor Babcock International (LSE: BAB) has seen its share price rise by more than 60% already in 2025. This £4bn business has benefitted from a string of contract wins, including a recent £1bn deal with the British Army.

Prime Minister Keir Starmer has said he plans to increase UK defence spending to 2.5% of GDP by 2027 and then to 3%. I reckon such long-term growth in defence spending could support companies such as Babcock to invest in new capacity and growth.

Broker forecasts suggest earnings could rise by 8% for the year to March 2026. Admittedly, this sounds quite modest. But earnings forecasts for last year were upgraded several times.

If the strong momentum continues, I think it’s possible that 2025/26 forecasts could rise further.

The main risk I can see is that Babcock could suffer a repeat of problem contracts that caused it big losses a few years ago (cost overruns on Royal Navy contracts dented profits). However, my impression is that CEO David Lockwood has taken steps to make similar issues much less likely.

Babcock shares currently trade on a forecast price-to-earnings (P/E) ratio of 16. That’s a little above average for this business, but I think this could be justified by strong market conditions and long-term growth potential. I see it as worth considering.

A golden opportunity?

Mexican gold and silver miner Fresnillo (LSE: FRES) has rocketed more than 60% higher since the start of the year. Digging out precious metals has become very profitable with gold trading at more than $3,000 per ounce.

Even after these gains, Fresnillo shares still look quite reasonably priced on just 12.5 times 2025 forecast earnings. There’s also a useful 4.8% dividend yield – family ownership suggests to me the dividend will always be important here.

Of course, the main risk is that gold and silver prices might start to fall. If that happens, Fresnillo’s share price could follow.

Gold was trading at under $2,100/oz a year ago. A fall back to that level could cut Fresnillo’s annual revenue by nearly $700m. My sums suggest profits could halve.

I think Fresnillo’s worth considering for investors who remain bullish about gold. Personally, I’m not sure.

Long-term growth story

Airtel Africa‘s (LSE: AAF) one of the largest mobile services operators in Africa. The group also has a fast-growing mobile money operation with nearly 45m subscribers.

I think this business has the potential to deliver above-average long-term growth, reflecting economic development in key markets such as Nigeria.

Stock market investors also seem to have climbed onboard with this story in 2025, lifting the shares by nearly 55% so far this year.

My main concern is that I’ve always found the company’s finances quite complicated, with a lot of exposure to unpredictable currency movements. There’s quite a bit of debt too.

With the stock now trading on 18 times 25/26 forecast earnings with a dividend yield of less than 3%, I need to do more research to understand the opportunity.

The post 3 FTSE 100 stocks that have already risen by over 50% in 2025 appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc and Fresnillo 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 month ago, on 9 April, investors were digesting an 11% drop in the FTSE 100 in just seven days.

In case anyone missed that, this sharp fall was triggered by President Trump’s ‘Liberation Day’ tariff announcement on 2 April.

At the time, I didn’t expect the market to be back in positive territory within a few weeks. But that’s where we are. A £10,000 investment in the FTSE 100 on 2 January would have been worth £10,620 at market close on 7 May, including dividends.

Admittedly, the FTSE 100 is still below the highs seen in March. But a 6.2% return in just over four months is not a bad result in my view. I’d chalk this up as a win for taking a long-term approach.

A FTSE stock to consider buying

When a stock index like the FTSE 100 moves up or down, it’s usually reflecting a much wider range of individual share price movements within the index.

We’ve certainly seen that this year. The top riser in the FTSE 100 so far this year is up by more than 70%. The biggest faller is down by nearly 30%.

The opportunity for stock-picking investors is to find shares that have a positive outlook and are still cheap enough to deliver further gains.

One company I think fits this description is Lloyds Banking Group (LSE: LLOY).

Lloyds shares are up by a healthy 33% so far this year, but in my view, there are some good reasons to consider this stock as a possible buy.

Positioned for long-term growth?

As the UK’s largest mortgage lender, Lloyds could benefit from any upturn in the housing market. This week’s Bank of England interest rate cut could help to improve mortgage affordability and encourage homebuyers to commit to new deals.

Looking further ahead, the bank is also working to expand its market share in areas that are less dependent on interest income. These include wealth management and commercial banking services.

Perhaps the main risk right now is Lloyds’ exposure to the FCA’s motor finance commission review. Lloyds has a big presence in this sector through its Black Horse business. Management has already set aside £1.15bn to meet potential compensation costs and extra overheads.

I’m confident the bank will be able to manage any likely costs. But until we get the Supreme Court decision on commission payments that were made without customers’ consent, it’s impossible to know the likely impact.

The right time to buy?

Warren Buffett once said, “The future is never clear; you pay a very high price in the stock market for a cheery consensus”.

What Buffett meant was that when everyone is happy and optimistic about a business, it’s often already very expensive.

Lloyds shares aren’t as cheap as they were in January. But the bank’s balance sheet looks healthy to me, and my sums suggest the 5% dividend yield should be safe.

Analysts expect the dividend to rise by a chunky 20% in 2026 – if correct, that could give a 6% yield on shares bought at current levels.

On balance, I think Lloyds shares remain attractive and are worth considering as a possible buy for income investors.

The post £10,000 invested in the FTSE 100 at the start of 2025 is now worth… appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group 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.

The Next (LSE: NXT) share price is edging higher in morning trading on Thursday 8 May, after the company upgraded its profit guidance for the second time this year.

Shares in this FTSE 100 retailer have now doubled in three years.

In this piece I’ll explain why Next is doing so well – and whether I’m buying the shares.

Warm weather boost?

Next says that sales during the first quarter of its financial year (to late April) were £55m higher than expected. The company had previously forecast an increase of 6.4% compared to last year, but actual sales were 11.4% higher.

The sales boost seems to have been driven by the early warm weather, with extra sales focused on “summer-weight clothing”. Next’s management reckons shoppers brought forward purchases they’d normally have made from May through to July.

Sales forecasts for the rest of the year have been left unchanged. But the Q1 boost to sales is enough to allow Next to lift its full year pre-tax profit guidance by £14m to £1,080m.

That’s equivalent to an earnings forecast of 698p per share, almost 10% higher than last year.

Next’s secret sauce!

In recent years, the high street stalwart has given other retailers a masterclass in how to adapt and profit from online retail. By building a portfolio of brands, the group has added new customers and found new sources of growth.

Another advantage that’s often overlooked is the company’s nextpay credit business, which allows customers to buy now and pay later.

Credit services added about 18% to Next’s trading profits last year, lifting the group’s operating profit margin to nearly 18%.

As far as I can see, that makes Next the most profitable big retailer listed on the London Stock Exchange.

Will I buy the shares today?

Next ticks a lot of boxes for me as a potential investment. As well as being a top-quality retailer (in my view), it also has a solid track record of dividends.

The ordinary payout has risen from 41p per share in 2005 to 233p per share last year. Shareholders have also benefitted from share buybacks and one-off special dividends over the years.

Buybacks can boost future earnings per share and support dividend growth. But unlike many companies, Next doesn’t want to overpay for its own shares. The company has a clear affordability test requiring a minimum expected return of 8% on buybacks.

Right now, the shares don’t pass that test. Based on today’s upgraded profit guidance, the maximum Next can pay for its own shares is £116. That’s 7% below the current share price of £124.

Next shares are starting to look expensive to me on other measures too. The forecast price-to-earnings (P/E) ratio of 18 is at the top end of the retailer’s historic valuation range, according to my research.

With the cost of living still high and the UK economy under pressure, I don’t think it makes sense to pay a top price for Next shares.

I’d prefer to have a bigger margin of safety, so I’ll be waiting – at least – until Next itself is happy to buy its own shares.

The post Here’s why the Next share price is rising again today appeared first on The Motley Fool UK.

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Roland Head 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.

Top FTSE 100 dividend share Imperial Brands (LSE: IMB) has risen by almost 70% over the last year.

The UK’s second-largest tobacco group went through a difficult patch a few years ago but is now firing on all cylinders. Last year, the business generated £2.4bn of surplus cash – enough to support a £1.25bn share buyback and a 5% dividend increase.

All of this good news comes at a price, of course. Imperial shares aren’t as cheap as they were 12 months ago. This means that as a shareholder, I need to decide whether to buy more, sell, or simply hold onto my shares.

A safer dividend?

In May 2024, Imperial Brands shares boasted a chunky forecast dividend yield of 8.3%.

One year later, the stock’s surging share price means this payout yield has fallen to 5.3%. That’s still well above the FTSE 100 average of around 3.6%. But it does mean that this tobacco stock is no longer one of the highest-yielding shares on the market.

As an income investor, I’m looking for high yield. But I’m also interested in safe dividends. In my view, Imperial’s dividend could actually be safer than it was a year ago.

Falling debt levels mean the company isn’t having to spend so much cash on interest payments. This year’s forecast payout is covered twice by expected earnings, up from 1.7 times in 2023.

Meanwhile, the high level of share buybacks has allowed CEO Stefan Bomhard to keep the total cost of the dividend the same, while increasing the payout per share.

I think the payout looks pretty safe. If I’m right, it might make sense to accept a lower yield.

Should I be worried?

Some investors choose to avoid tobacco stocks for ethical reasons. That includes many big fund managers, whose ownership might otherwise provide more stability for the stock.

There’s also the risk that the tobacco business will eventually shrink to a level that’s not sustainable. Imperial’s cigarette volumes fell by 4% last year, continuing a long-term trend. Sales growth was driven by price increases alone.

Sales of alternative products such as vapes also represent a risk. They may be more attractive for younger smokers than cigarettes, but I suspect they will always be less profitable due to much higher levels of competition.

What I’m doing

I probably should think about buying more Imperial shares. Earnings are expected to continue rising, the dividend looks safe for now and I think the business is under strong management.

The shares don’t look too expensive either. A 2025 forecast price-to-earnings ratio of nine and 5.3% dividend yield mean Imperial is still much cheaper than the average FTSE 100 share.

However, I can’t ignore the fact that this isn’t really a growing business. Regulatory risks are also higher than I’d like. This is especially true for Imperial. The group sells most of its cigarettes in heavily regulated developed markets, such as the UK and Germany.

On balance, I think the current price is reasonable, but not cheap enough to persuade me to buy. I’m going to continue holding my Imperial shares for now, but I’ve no plans to buy more.

The post Up 68%, is this top UK dividend share still a bargain buy? appeared first on The Motley Fool UK.

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Roland Head has positions in Imperial Brands Plc. The Motley Fool UK has recommended Imperial Brands 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.

Marks and Spencer (LSE: MKS) shares have risen by around 20% over the last month, making the firm one of the top performers in the FTSE 100 over this period.

The retailer’s shares have climbed by nearly 60% over the last year. On a five-year view, the M&S share price has risen by an impressive 350%.

In this piece I’m asking whether investors should still consider buying M&S shares. Is there still more to come from this impressive turnaround?

Strong momentum

A few years ago, Marks and Spencer seemed an unlikely choice for an investment success story. Falling sales, dated stock, and unprofitable stores were holding back profits.

Since CEO Stuart Machin took charge in May 2022, much of this has changed. Annual sales have risen by 23% to £13.4bn, while operating profit is up by almost 50% to £864m.

Machin has cut debt, closed unprofitable stores, and led a revamp of the core Clothing, Home & Beauty business. At the same time, M&S Food has continued to carve out a niche as a popular choice for shoppers looking for an affordable upgrade from the big supermarkets.

The company’s most recent trading update covered the last 13 weeks of 2024 – including the all-important Christmas period. Total group sales rose by 5.6% to £4.1bn.

Food sales were up by 8.7%, including the “biggest day” ever.

Meanwhile, the group’s Clothing, Home & Beauty division achieved its biggest ever week of online sales.

Is a slowdown likely?

I think there are some good reasons to take a more cautious view on M&S shares. First of all, this business is not as cheap as it was.

As I write, the shares are trading on around 13 times 2025/26 forecast earnings. A year ago, Marks and Spencer’s forecast price-to-earnings ratio (P/E) was only 10.

A P/E of 13 isn’t expensive for all types of business. But M&S is a large, mature retailer operating in a sluggish UK economy. Profit margins are relatively low.

Growth over the last couple of years has been boosted by operational improvements. With many of these changes now complete, I am not sure if recent growth rates will be sustainable. Slowing growth could put pressure on the stock’s valuation.

There’s also the risk that new problems could hit the business. On 22 April, M&S revealed that its store operations had been hit by a recent cyberattack. According to some press reports, click and collect services were disrupted.

The company hasn’t revealed any details about the attack. But events such as this can be costly and take time to resolve.

M&S shares: buy or avoid?

All investments carry some risk. But I think there are some good reasons to remain positive about Marks & Spencer. This business has a huge footprint in UK retail and is operating much more competitively than it was a few years ago.

Online growth is also a positive. Many shoppers expect a seamless blend of in-store and online retail, and M&S is well positioned to provide this.

Meanwhile, the M&S Food business could do well, even in a recession, as shoppers buy treats to eat at home instead of dining out.

Overall, I think M&S is still worth considering as a possible investment.

The post Up 20% in a month, should investors consider buying Marks & Spencer shares? appeared first on The Motley Fool UK.

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Roland Head 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.

Recent market volatility has shaken share prices across the FTSE 100. While President Trump’s tariff regime certainly carries some risk and uncertainty for businesses, I think it could also create opportunities for UK firms that already have a big footprint in the US.

One company I’ve recently added to my holdings is generic medicine specialist Hikma Pharmaceuticals (LSE: HIK). This £4bn FTSE firm gets much less press than its larger peers AstraZeneca and GSK. But I think there are some good reasons to choose Hikma instead right now, as I’ll explain.

How is Hikma different?

Unlike its peers, Hikma doesn’t focus on developing all-new medicines. Instead, the company develops generic versions of popular medicines that can be sold when their initial patent protection expires.

Generics are typically sold at much lower prices than the branded products they replace. But they can often generate high volumes of sales for many years, as they become the accepted treatment for common health issues.

One exciting opportunity Hikma’s pursuing at the moment is to create generic alternatives to popular weight-loss drugs Wegovy and Ozempic. Patent protection for these branded products begins to expire next year in some countries.

The popularity of these medicines has skyrocketed. I think it’s safe to assume many more people might use them if the price comes down. In my view, this could become an important growth market for Hikma over the coming years.

US manufacturing: a potential advantage?

North America’s already Hikma’s biggest market, generating more than 60% of sales. Luckily, the company also has a big manufacturing footprint in the US. If tariffs are applied to pharmaceuticals – which isn’t yet certain – then I’d guess that US-made products could gain a price advantage. This could help Hikma increase its market share.

In its latest results, Hikma said it invested nearly $50m in upgrading its US manufacturing facilities last year. There were also upgrades in North Africa and Europe, suggesting to me that the company’s focused on meeting demand locally where it’s able to do so. If the deglobalisation trend continues, this could become more of an advantage.

However, I think it would be foolish for me to be too sure about any potential US advantage. The tariff situation remains unpredictable.

Hikma’s growth ambitions haven’t always gone to plan, either. The company reported an operating loss of £770m in 2017 due to problems with a big acquisition. More recently, profits from generic medicines also fell sharply in 2022, as the company struggled with a “challenging competitive environment in the US”.

Why I think Hikma’s cheap

Hikma’s 2024 results showed sales rising by 9% to $3.1bn, with an underlying net profit of $495m. An operating profit margin of 19.6% showed that it’s possible to generate attractive levels of profit, even in more competitive generic markets.

Broker forecasts suggest modest earnings growth in 2025, before a stronger year in 2026. The shares currently trade on a forecast price-to-earnings ratio of 11, with a useful 3.3% dividend yield.

Hikma stock’s traded significantly higher in recent months, and I don’t see any reason why the shares should not recover to previous levels. I think the shares look attractive at the moment and are worth considering as a possible buy.

The post Is this FTSE 100 share a screaming buy to consider after recent falls? appeared first on The Motley Fool UK.

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Roland Head has positions in Hikma Pharmaceuticals Plc. The Motley Fool UK has recommended AstraZeneca Plc, GSK, and Hikma Pharmaceuticals 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.