The Motley Fool

Can the Saga share price ever recover?

Image source: Getty Images

The Saga (LSE: SAGA) share price has been on a wild ride this year. Shares in the British insurance, travel, and financial services firm started the year at around 800p (after adjusting for the recent share consolidation), and have since plunged to just over 125p. 

Following this decline, investors might be wondering if the stock could ever recover to previous highs. That’s something I’m going to look at today. 

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...

Saga share price recovery

Investor sentiment towards the business was already weak heading into 2020, and then the coronavirus crisis hit. Saga was betting a lot of money on the success of its cruise business, but unfortunately, this business is beached.

While the company has stated that demand for its sailings due in 2021 has held up well, the longer the crisis goes on, the less likely it is the business will be able to capitalise on this demand.

Indeed, larger cruise companies have already started to cancel sailings for next year. If Saga has to push back these voyages, the company’s recovery will be delayed further still. 

Nevertheless, while the group’s cruise business may continue to struggle, the outlook for the rest of the operation seems bright. Saga has a strong reputation among the over-50s, and this reputation should help the company recovery on the other side of the crisis. 

What’s more, Saga’s recent restructuring and cash call have significantly strengthened the group’s balance sheet. 

All of the above should help the Saga share price recover in the long term.

Unfortunately, at this stage, it is impossible to say when the recovery will finally start to take hold. If the coronavirus crisis continues into 2021, it could be several years before the firm’s sales return to 2019 levels. 

But, when the recovery does eventually take hold, figures suggest the shares could rise several times over. Indeed, analysts reckon Saga has the potential to earn 58p per share in 2022. That puts the stock on a forward price-to-earnings (P/E) ratio of 2.4. Still, as noted above, these forecasts are highly dependent on the company being able to restart operations in 2021. 

The bottom line

So overall, there is a chance the Saga share price could recover. However, at this point, there’s no guarantee the business will be able to return to growth in 2021/22. 

As such, this may be an investment that’s only suitable for the most risk-tolerant long-term investors. If earnings recover in 2022, there’s a chance the shares could double or triple from current levels. The chances of this, however, are not high. I would put them at about 50/50. 

If the company can’t return to growth, the stock could languish at current levels or even fall further. That’s why this investment may only be suitable when owned as part of a well-diversified portfolio. 

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

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.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.

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.