The Motley Fool

Gold, silver and bronze medals to my top 3 British retailers!

Today I’ll be revealing my top pick from three high-street retail giants whose shares are trading at attractive valuations. In my view all three represent excellent investment opportunities but only one can be awarded the gold medal, the others will have to settle for silver and bronze.

Income attractions remain

Long-term stakeholders in department store chain Debenhams (LSE: DEB) won’t have enjoyed watching their shares sink to five-year lows recently, with 30% wiped-off the company’s shares in the last 12 months alone. But despite this year’s sell-off, I’m still a little cautious over any short or medium-term share price recovery as City forecasts point to a downturn in earnings over the next two years.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

However, I fully expect the FTSE 250-listed retailer to continue with its policy of dividend growth as prospective payouts look easily affordable at around two-times forecast earnings. For me, the recent weakness in the share price has created an attractive entry point for income investors seeking a rising dividend with the yield now reaching 6%. Third place on the podium for Debenhams with a bronze medal from me.

Slowdown continues

The phenomenal success of British clothing retailer Next (LSE: NXT) is undeniable, with its relentless rise in revenues and profits going back more than 15 years, coupled with equally impressive dividend growth. But nothing lasts forever, and the blue chip retail giant is experiencing a slowdown, with full-year results for FY2016 showing just 5% growth, compared to healthier double-digit rises in previous years.

More of the same is expected in the medium term with earnings remaining flat this year, and only 2% growth pencilled-in for FY2018. Despite the slowdown, I think the steep share price decline means the valuation now looks tempting for bargain hunters at just 12 times forecast earnings for FY2018, and now could be a good time to buy ahead of next month’s interim results. A good candidate for growth and a silver medal position.

No Brexit impact

Another high street chain down in the doldrums is Mothercare (LSE: MTC). The retailer for mothers and young children is still reeling from disappointing news earlier in the year when it highlighted difficulties in its international business. The small-cap retailer saw its shares fall off a cliff back in April with the lower oil price impacting on consumer sentiment in the Middle East, weakening confidence in Asia, and adverse currency moves in Europe and Latin America all contributing to a 10% drop in international sales.

The Watford-based business says it expects to see limited impact from the outcome of the Brexit vote during the full year, and indeed the shares were unscathed by the market sell-off following the referendum. City analysts are talking about an 8% rise in earnings this year, followed by an even better 15% improvement next year, with the P/E ratio falling to a modest 11 by March 2018. The strong recovery potential and attractive valuation makes Mothercare my #1 retail pick – gold medal.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.