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If you’re late to the party, I think you may be Just in time

A poor pun perhaps for a stock that has failed to yet bounce back from the lockdown, but Just Group (LSE: JUST) is looking like a neglected bargain to me.

The financial services group and retirement specialist is currently trading at 47.7p at the time of writing, which is down 20% from the Covid-induced market collapse in mid-March, and at a discount of 14% to its 52-week price. If it was considered a bargain then, think how much truer that would be now.

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Just Group’s share price has fallen by 74% in the last five years; however, this decline has been very gradual. Over the years it has suffered knocks, such as newer restrictions on sales of equity release products in late 2019. Net income was negative in 2018 which broke a streak of stable annual earnings, which is also the year it stopped issuing dividends to its shareholders.

The bargain comes into view

However, I  believe Just Group is in a good position to reclaim lost ground. It did well to quickly recover from its 2018 slump in net earnings, a turnaround that restored trust in the executive committee’s governance ability. 

The board is eager to keep up with the times and release new products. On July 13th, they announced the UK’s first ‘green’ lifetime mortgage, which followed swiftly from the Chancellor’s announcement of a £2 billion Green Homes Grant scheme. Paul Turner, Managing Director of Retail, commented that this was part of their mission to “continually [expand] our broad range of products.”

This may appear to be a bit of gimmick given that it is not expected to represent a large share of the mortgages that it issues. Nevertheless, it demonstrates the company leadership is capable of moving more quickly than its competitors, putting its foot in the door of eco-innovation. A company that is active with new product announcements will more likely attract attention in the long run. Buy-and-hold may prove to be the best strategy.

The real bargain becomes clearer when the share price is placed into perspective. Despite its steady long-term decline, this has been periodically broken by fairly regular bouts of market confidence. Recently, this led to a high point of 87.05p on Jan 3rd and maintained a strong point until Feb 19th (84.75p).

Additionally, the current share price at 47.7p hasn’t been this low since 2013. Whether or not the price will return to its market value earlier this year is unclear; however, I’d argue an increase in its current price is due as it appears fairly undervalued presently.

Just Group is promising but not without its faults.

A poorly wrapped present

The more cautious investor will likely disregard this stock, and perhaps understandably so, with a current price-to-book ratio of 0.24. Its asset-liability ratio is also low, just 1.09. Nevertheless, its earnings per share grew 185% when compared to its five-year average of 9.93, and has a long-term price earnings ratio of over 1.5.

If its leadership is able to keep a steady skip, they may yet be able to offer the company to the market as a welcome – if shoddily packaged – present to investors.

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While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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Robert Osborne does not own shares in Just Group. 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.

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