The Motley Fool

The Kier Group share price is up 60% in a month! Here’s what I’d do now

Image source: Getty Images.

Who doesn’t love a comeback kid? Many investors back stock market losers in the hope of picking it up at a bargain price just before it begins its fightback.

Lately, bargain hunters have been busily backing construction and services company Kier Group (LSE:KIE), one of Neil Woodford’s most notorious stock picks (and boy did he have a few). At one point, the heavily shorted stock looked set to go the same way as other high-profile outsourcing specialists, the now defunct Carillion and Interserve. It’s still standing though, and the Kier share price trades at shockingly low levels.

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...

Just three years ago, the group’s stock stood proud at around 1,400p, only to lose more more than 95% of its value as it fell to a low of around 60p last summer. It has picked up slightly to trade at around 13op today, after climbing an impressive 60% in the last month, rewarding risk takers who got their timing right.

High rewards, high risks

As ever, there’s no guarantee the Kier share price will repeat this outperformance. Anybody who buys it today must brace themselves for serious volatility in the weeks and months ahead. Are you up for that?

Kier was caught by the Carillion fallout, which made banks reluctant to lend. That forced management into emergency mode, including a widely-snubbed £264m fundraising in December 2018. The company slumped to a pre-tax loss of £245m last year, down from a profit of £106m the year before, while debts rose alarmingly.

After a management clear out, new CEO Andrew Davies has fast-tracked his turnaround plan, cutting jobs and suspending dividend payments. He’s also been offloading non-core operations, such as homebuilding business Kier Living, cutting jobs, and seeking £60m of cost savings. Debt remains a major worry and will for some time.

The leaner company now aims to focus on infrastructure, regional construction, utilities and road maintenance. It boasts a decent order book, including high-profile contracts for multi-billion pound construction projects, notably Hinkley Point C, Crossrail and HS2, and continues to win new contracts. So would I buy it?

Kier we go?

My experience of companies in recovery is that the fightback is typically longer and harder than you think. You get that early share price spike, a kind of mini relief rally as the danger of total collapse is averted. But then the hard work begins. Kier Group is at the start of that phase.

Its success partly depends on the UK economy. Some have cited Brexit as a worry, but that may be a headwind, with new chancellor Rishi Sunak under pressure to greenlight an infrastructure splurge, while HS2 has been approved.

Kier Group stock is dirt cheap, trading at just 2.27 times earnings, which some will find hard to resist. It has a long road ahead. You should only invest if you’re prepared to be patient, and understand all the risks. On those terms, it could offer risk-seekers an exciting ride.

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...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Harvey Jones 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.

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.