The recent FTSE 100 stock market crash means many large-cap shares now trade on low valuations. Although these companies could experience further share price declines in the near term, they could offer recovery potential over the long run.
However, some businesses are in a better position than others to stage recoveries. With that in mind, here’s one FTSE 100 stock which appears to offer a wide margin of safety I’d buy today. And one company I’d avoid at all costs.
FTSE 100 stock bargain
The coronavirus crisis has forced global commodities giant Glencore (LSE: GLEN) to close many of its operations around the world. Clearly, this will have a significant impact on growth for 2020. Nevertheless, as the world’s largest commodities trader, the company is a critical part of the global economy.
So, while the crisis may continue to impact Glencore’s operations for some time, the long-term return potential of the FTSE 100 stock is high. With the stock down 41% since the beginning of the year, it appears to offer a wide margin of safety at current levels.
The stock also seems to be in a relatively stable financial position to overcome its present challenges. The company ended 2019 with net debt of $17bn, slightly above its targeted range of between $14bn and $15bn. But to help preserve liquidity, management has also postponed its latest dividend, saving $2.6bn.
Considering all of the above, buying the FTSE 100 stock today and holding over the long run could produce high returns for investors.
Company in trouble
While Glencore’s long-term future seems bright, the same can’t be said for Informa (LSE: INF). The coronavirus crisis has upended the business model of the FTSE 100 stock.
The world’s largest exhibitions operator has had to cancel virtually all of its planned events. As a result, revenue has collapsed.
To try and shore up its balance sheet, the FTSE 100 stock tapped shareholders for £1bn in cash earlier this month. This will help keep the lights on for the immediate future.
Unfortunately, if the crisis lasts for longer than expected, Informa could be in trouble. The company ended 2019 with net debt of £2.7bn, more than 10 times net income for the year. These substantial liabilities give the organisation limited options.
The one bright spot is the firm’s subscription business. This part of the operation, which makes up around 35% of revenues, is reportedly still growing. This business will help Informa muddle through. But with no end to the coronavirus crisis in sight, it’s impossible to tell if the company will ever be able to return to its former glory.
As such, it could be best to avoid this FTSE 100 stock for the time being. There are plenty of other companies out there with more durable balance sheets and predictable revenue streams.
With some of these companies trading at their lowest levels in 10 years, they could offer better value for money than Informa.
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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.