The Motley Fool

Is the RBS share price or this falling FTSE 250 knife the brighter bargain today?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Scene depicting the City of London, home of the FTSE 100
Image source: Getty Images.

As details of the UK’s divorce agreement with the European Union have emerged, investors have been quick to dump shares in Royal Bank of Scotland (LSE: RBS)

It is easy to see why. The bank is significantly exposed to the UK economy, and it has barely recovered from the financial crisis, but management is already getting ready for another downturn. In October, the company warned that it has put £100m aside for bad debts due to the “uncertain economic outlook,” and trebled the amount it has set aside to help SMEs navigate Brexit to £3bn.

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...

Preparing for the worst? 

These preparations seem to indicate that RBS’s management team is preparing for the worst. But as of yet, we don’t know how Brexit will unfold, and if it will be as bad as some analysts are expecting. 

If it isn’t, and economic growth suddenly recovers, I think shares in RBS could quickly bounce back. After all, the stock is trading at a significant discount to the bank’s tangible asset value per share, which was 288p at the end of September. 

This discount would be understandable if RBS were still loss-making, but with the company on track to report a net profit of nearly £2bn for 2018, I don’t think the discount is warranted. That being said, there are other factors to consider here, such as the government’s substantial stake in the bank, which is acting as an overhang on the shares because sooner or later, it will have to be sold. 

Still, when compared to its peers both here in the UK, and across Europe, shares in RBS undeniably look cheap. However, this is not a bet for the faint-hearted. Only time will tell how the UK economy will react to Brexit and if RBS’s £100m provision for bad loans will be enough. 

So, while the stock could jump substantially from current levels, most investors might not be comfortable with this level of uncertainty. If you fall into this bracket, you might be more interested in FTSE 250 turnaround situation Mediclinic International (LSE: MDC)

FTSE 250 turnaround 

Mediclinic is an internationally diversified healthcare facilities provider. Unfortunately, the group has fallen out of favour with investors recently after booking a series of impairment charges on its UK and Swiss businesses for a total of £262m. 

These two businesses are struggling amid government regulation and increased competition. Mediclinic’s other markets are performing well. The group’s South African and Middle East operations reported revenue growth of 5% for the first six months of the company’s financial year.

Because the company operates in a relatively defensive market, I think it should be able to overcome its problems over the medium term. Analysts are already expecting a recovery for fiscal 2020. They are forecasting earnings per share of 31p, up from a loss in fiscal 2018. This estimate puts the stock on a forward PE of 11.4, which in my opinion gives a healthy margin of safety for investors buying at this level. There’s also a dividend yield of 2.3% on offer.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Rupert Hargreaves owns no share 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.