The 2020 stock market crash has caused a wide range of UK shares to trade at cheap prices. In the short run, their valuations could come under further pressure as a result of risks such as the ongoing pandemic and Brexit.
However, over the long run, high-quality companies with sound recovery strategies could produce impressive turnarounds. As such, they may now have investment potential after their share price falls.
With that in mind, here are two FTSE 100 shares that have fallen heavily since the start of the year. They could deliver improving performances that help an investor to retire early.
Recovery potential relative to other cheap UK shares
Morrisons (LSE: MRW) could offer sound turnaround prospects relative to other cheap UK shares. The supermarket’s valuation has declined by 18% since the turn of the year, with it underperforming many retail peers since the stock market crash.
However, its recent updates have shown that it is making good progress in adapting to changing shopping habits among UK consumers. For example, it has increased its online delivery capacity since the start of the year. This should provide it with scope to expand its sales and profitability over the long run, as the grocery industry gradually moves online.
The Morrisons share price now has a price-to-earnings (P/E) ratio of 11.7. This suggests that it offers a wide margin of safety, with it expected to post a 6% rise in net profit next year.
Certainly, a weak economic outlook could weigh on investor sentiment in the short run. However, the retailer could deliver impressive returns relative to other UK shares in the coming years.
Growth prospects as global economy recovers
WPP (LSE: WPP) is another FTSE 100 stock that appears to offer turnaround potential relative to other UK shares. The advertising business has recorded a share price fall of 43% since the start of the year. Its progress has been disrupted by a weak global outlook that has reduced non-essential spending across a wide range of industries.
However, WPP’s recent updates have shown that it has won new clients, reduced debt and is making major cost savings. This suggests that it is using a sound strategy to survive the short run. And it could expand its market position as the economy recovers over the long run.
The company’s shares currently trade on a P/E ratio of 11. They appear to offer good value for money, since the business is forecast to post a 29% rise in earnings next year.
Certainly, its earnings estimates are likely to change depending on the prospects for the world economy. However, with a sound strategy, solid market position in the growing technology sector and a low valuation, the stock could outperform other cheap UK shares as the FTSE 100 recovers following the 2020 stock market crash.
Peter Stephens owns shares of Morrisons and WPP. 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.