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These fallen FTSE 100 stocks are climbing again: is it time for me to buy?

Educational specialist Person (LSE: PSON) disappointed investors when it was forced to freeze its dividends in 2016 after building a reputation for solidly progressive payments. But worse was to come the following year when the annual cash handout was slashed from 52p per share to just 17p.

It was all down to troubles with the firm’s North American business, and even today the share price is still down 40% from its March 2015 high.

But with the firm’s recovery plan under way now for several years, the more recent price chart looks better. We’ve seen a 17% rise over the past two years while the FTSE 100 has remained pretty much flat, so is it time to buy back in?

A Q1 update on Friday recorded a 2% revenue rise in North America, with a 4% rise in the firm’s Core markets, and flat revenue from its ‘Growth’ regions (which include China, Brazil, South Africa and India).

Costs

The company said it is “on track to deliver annualised cost savings in excess of £330m exiting 2019.” Those cost savings do appear to be making a difference, with net debt down to £0.5bn at the end of the quarter, from £0.6bn a year previously — though on a post-IFRS 16 basis, net debt was around £1.2bn.

Pearson has disposed of its US K12 Courseware business, and after adjusting for that, its guidance for the full year remains unchanged, with an expectation of operating profits between £590m and £640m.

I’m impressed by Pearson’s progress, so why am I not buying? The company is still in a very tough market, and the US is especially competitive. And the price recovery, though still modest, puts the shares on P/E multiples of around 14. I don’t see a sufficient safety margin there to cover the risk.

Retail shock

Kingfisher (LSE: KGF) investors saw their shares crumble in 2018, but since the beginning of 2019 they’ve put in a 28% recovery. To put that into perspective, though, Kingfisher shareholders are still down 38% over the past five years, and they’ve only had modest dividends of around 3% per year to offset their losses.

But is the owner of B&Q and Screwfix back on track and are the shares cheap?

Well, the dividend is starting to look decent again, with a yield of 4.6% on the cards for the year ending January 2020. Admittedly that’s mostly because of the depressed share price, but analysts are predicting a return to dividend growth with an 8% hike to 11.7p pencilled in for 2021.

And while last year’s dividend was maintained at 10.8p, the company has returned an additional £600m to shareholders through share buy-backs over the past three years — though the timing and prices paid might be questioned, as the shares were steadily declining over that period.

New growth

While the year did still bring a 13% fall in underlying pre-tax profit, the core of the company’s restructuring (what it calls rebuilding its ‘engine’) seems pretty much complete, and a return to earnings growth is expected for the current year.

If the 18% EPS uptick predicted for this year materialises, we’ll be looking at a P/E of around 10, dropping to a little over nine on the further 10% rise indicated for next year. Dividends by then should be around twice covered too, and I’m seeing Kingfisher as a tempting income-plus-growth play.

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Alan Oscroft 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.