The Bitcoin performance has been hugely disappointing since it almost reached $20,000 in late 2017. Since then, it’s dropped in value by around 80%, which clearly shows investor sentiment has deteriorated significantly.
Also falling in recent months have been shares in Boohoo (LSE: BOO). The online fashion retailer’s share price is down 27% since October, with a weak outlook for UK consumer confidence weighing on investor sentiment.
However, the long-term prospects for the stock appear to be relatively appealing. Alongside another falling stock which released a disappointing trading update on Wednesday, it could offer better recovery prospects than Bitcoin.
The stock in question is McBride (LSE: MCB), the manufacturer and supplier of Contract Manufactured and Private Label products for the domestic and professional cleaning markets. Although it has experienced pressures on its cost base in the first half of its financial year, it expects the overall raw material pricing outlook to show improvements in the second half. But, alas, not to the extent that its previous guidance suggested.
Alongside this, the company expects distribution costs to rise due to market rates and efficiency challenges, driven by logistics capacity shortfalls and internal service gaps. As such, it anticipates adjusted pre-tax profit will be 10-15% below previous guidance.
While McBride’s update is disappointing and caused a 30% fall in its share price, the company’s sales performance continues to be strong. It trades on a price-to-earnings (P/E) ratio of around 7, which suggests it offers a margin of safety. Therefore, while risky, it could offer turnaround potential over the long run.
As mentioned, the performance of the Boohoo share price has been disappointing in recent months. Investors appear to be adopting a cautious stance towards a number of retail stocks with exposure to the UK, since consumer confidence remains weak ahead of Brexit.
However, in Boohoo’s case, the company is forecast to post high earnings growth in the current year. In fact, its net profit is expected to rise 20-25% over the next two financial years, which suggests it continues to have a bright future. Its online focus means it may have a competitive advantage over sector peers, since its business model is already highly efficient and well-placed to benefit from the increasing use of mobile devices to purchase clothing.
Following the stock’s fall in value over recent months, it now has a price-to-earnings growth (PEG) ratio of 1.2, which suggests it may offer good value for money. Although Boohoo and its retail peers may experience shoppers who are increasingly price conscious, which could impact negatively on their sales and/or margins in the near term, in the long run the company appears to offer growth at a reasonable price. It could therefore deliver a successful share price recovery.
Since the online retailer has fundamentals which provide guidance on its potential valuation, as well as its growth prospects, it appears to offer a stronger risk/reward opportunity than Bitcoin.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. 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.