After recent market declines, some FTSE 250 shares are now trading at levels not seen since the financial crisis. This could be an excellent opportunity to snap up shares in these businesses at a discount price.
With that in mind, here are two FTSE 250 shares that have fallen 50% and could make attractive investments.
FTSE 250 shares offer value
Shares in pub group J D Wetherspoon (LSE: JDW) have taken a hammering over the past two weeks. Investors are rightly worried about the impact the Covid-19 outbreak will have on trade across the group.
These worries have proven to be well-founded. Towards the end of last week, the company cancelled its dividend and informed investors that said sales dropped significantly after the government asked people to avoid pubs, restaurants and theatres to curb the spread of the virus.
Nevertheless, the group also stated that it has enough financial liquidity to maintain operations.
Over the past few years, Wetherspoon’s has been reducing debt and buying out the freeholders of its properties to reduce spending on leases. This puts the company in a great financial position to weather the storm.
And when the market does recover, Wetherspoon’s should roar back. The company’s low-priced offering appeals to customers in tough economic times. It looks as if we’re heading for those right now.
When the company’s earnings recover the level reported in 2019, the stock could more than double from current levels. That’s based on the fact that the stock has previously commanded a price-to-earnings multiple in the mid-teens.
As such, the risk/reward ratio of buying the stock at current levels appears attractive.
Another hospitality stock that looks deeply undervalued at current levels is Marston’s (LSE: MARS).
Like Wetherspoon’s, Marston’s also owns a lot of property, but the market seems to be overlooking this fact.
Right now, the stock is trading at just 30% of book value. This figure suggests the business could be worth 200% more than its current market capitalisation if it was broken up and sold. That does not make much sense, which is why it looks as if this is one of the cheapest FTSE 250 shares out there.
It is true that, like Wetherspoon’s, Marston’s is also suffering from a decline in trade.
Nevertheless, the company’s strong balance sheet, as well as a reputation among customers, should help it make a quick recovery when the economy eventually returns to normal.
When it does, the business can restore its 7.5p per share dividend. This suggests investors buying today could be in line for a dividend yield of 28.6%.
Put simply, while it looks as if Marston’s is facing much uncertainty in the short term, the company’s long run investment potential is highly attractive.
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Rupert Hargreaves 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.