[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

FRP Advisory Group

What it does: FRP Advisory Group helps businesses in difficult situations in areas such as restructuring and accountancy.

By Muhammad Cheema. Unfortunately, due to the tough economic times we find ourselves in, businesses are struggling.

According to the Department for Business, Energy and Industrial Strategy, insolvencies increased by 13% year on year (YoY) to 6,342 in the second quarter of this year.

While this isn’t great for most businesses, it is for AIM stock FRP Advisory Group (LSE:FRP).

Its expertise in helping troubled businesses with services such as restructuring, insolvency, and financial advisory means that it’s likely to thrive in the current environment.

It has been experiencing a surge in growth. In the latest quarter, revenue increased 18.8% YoY. What’s even more impressive is that earnings grew by 49.2% YoY.

My one concern with the company is that it’s trading with a price-to-earnings (P/E) ratio of 21, which is quite expensive.

However, it’s growing very strongly and if the economy continues to struggle, I believe it will provide great returns to investors in 2024.

Muhammad Cheema does not own shares in FRP Advisory Group.

Jet2

What it does: Jet2 is a British budget airline operator, catering to short haul destinations mostly around Europe.

By Jon Smith. The travel and tourism sector is one that I’m bullish about as we start 2024. Therefore, I like Jet2 (LSE:JET) as a way to express this view.

The low-cost airline operator was hit hard by the pandemic, but finally the tide is turning. Over the past year, the stock is up 37%, as company financials improve. The half-year 2023 report showed that operating profit is now back above pre-pandemic levels.

Looking ahead, it commented that “current seat capacity for Summer 2024 at 17.19m seats is approximately 12% higher than Summer 2023”.

I think that there could be good potential for the AIM-listed stock to rally over the coming year. I do note that there’s stiff competition in this sector, particularly in the budget category. This could cause margins to be cut. Yet given the seat capacity for next year is already looking promising, it appears this risk is being contained.

Jon Smith does not own any of the shares mentioned.

Keywords Studios

What it does: Keywords Studios is a leading provider of technical and creative services to the video game industry.

By Edward Sheldon, CFA. Keywords Studios’ (LSE: KWS) share price has taken a huge 50%+ hit recently and I think the AIM stock is oversold.

The share price has fallen because of fears over generative artificial intelligence (AI). Investors are concerned that this new technology (which can do some amazing things) could reduce demand for services Keywords Studios offers such as art design and language translation.

This certainly is a risk to consider. However, I believe the fears are overblown.

Keywords Studios is active in the AI space itself and has been responsibly harnessing the technology for a number of years. Meanwhile, management said recently that it was excited about the opportunities that lie ahead.

With the shares currently trading on a price-to-earnings (P/E) ratio of less than 15, I think the risk/reward proposition here is very compelling as we start 2024. That’s a low valuation relative to the growth the gaming company is generating.

Edward Sheldon has no position in Keywords Studios.

Windward 

What it does: Windward is a software company that operates a predictive maritime analytics platform.

By Ben McPoland. I think shares of Windward (LSE: WNWD) are well worth considering in January. This £72m firm operates a leading AI-powered predictive platform for the global maritime industry. It helps its customers manage risk by providing real-time intelligence relating to things like sanctioned vessels and potential drug smuggling.

Since the EU’s sanctions on Russia (and other regimes), identifying deceptive shipping practices has become increasingly important. This is benefiting Windward. It secured 48 new commercial customers during H1, almost as many as in the whole of 2022. And its revenue jumped 18% to $12.8m while its annual recurring revenue is also building nicely.

Now, I should point out that Windward is based in Israel. It says the tragic events there haven’t affected trading and its offices remain open. But it’s worth noting because the risk of the conflict spreading can’t be ruled out, unfortunately.

That said, I’m very encouraged by the AIM stock’s progress. It expects positive EBITDA  in 2025 and the shares are trading at a reasonable 3.8 times sales. I’m planning to invest.

Ben McPoland does not own shares of Windward.

The post Best AIM stocks to consider buying in January appeared first on The Motley Fool UK.

Shareholders clearly think this is a good deal. And I think so too. But what are the details?

Just Eat will receive an initial cash sum of €1.5bn. Up to €300m more will then follow depending on performance over the next 12 months.

Just Eat reckons the sale represents a five-fold gain, and that alone is reason for cheer. But I think it’s more important than that.

Expansion

The very competitive takeaway delivery business has been characterised so far by a race for market share. That’s involved big spending on expansion, takeovers and mergers, and growing transaction volumes… but precious little in the way of profits.

In full-year 2021, Just Eat reported a 33% rise in revenue, to €5.3bn. But it also recorded a €350m adjusted EBITDA loss.

The company did say its EBITDA losses peaked in the first half. And it added that it “is now rapidly progressing towards profitability.”

Focus

That surely must be the focus now. I think companies in this sector need to concentrate on their balance sheets, and make liquidity and profitability their key targets. Jam tomorrow is no good if you don’t have enough bread for today.

That’s where Just Eat’s latest disposal should pay off. The company says it “remains focused on improving its profitability and on a disciplined allocation of capital.“

It added that it “will retain the transaction proceeds to maintain its balance sheet strength and to service repayments of its upcoming debt maturities.”

Maturity

The fast food delivery business has progressed the way many developing new business sectors have in the past. The barriers to entry were relatively low at the beginning, and that led to a rapid expansion as competing companies tried to sign up as many food outlets as possible.

That we’d see takeovers, acquisitions and consolidation in the sector was pretty much inevitable. The companies are now focusing on their key profitability rather than going all out for market expansion.

There’ll be more similar transactions, almost certainly. Even with this latest news, Just Eat says it “continues to actively explore the partial or full sale of Grubhub.”

Outlook

Just Eat hasn’t changed its guidance from interim results a couple of weeks ago. It expects gross transaction value to grow “by mid-single digit year-on-year in 2022.”

And adjusted EBITDA margin should be in the range of minus 0.5% to minus 0.7%. So it expects no profit just yet. But it says it expects positive EBITDA in 2023.

The sector is maturing. The long-term players are emerging. And I think the firm is likely to become one of the profitable ones.

I won’t buy any Just Eat Takeaway shares, though. I just don’t invest in anything where I can’t yet measure the profits.

The post The Just Eat Takeaway share price has jumped 30%. Here’s what I’d do appeared first on The Motley Fool UK.

Rentokil Initial’s strong results

Both stocks fell after they released results. So I need to try to figure out whether they indeed deserved the hammering they just took or if it just happens to be a temporary market overreaction that could balance itself out over time. First, let us look at Rentokil Initial. Frankly, there was little to dislike in its results, I feel. Its revenues were up by 5.5% in 2021 compared to the year before, its pre-tax profit was up a huge 41.5% and its dividends rose too. It also has a positive outlook for 2022. 

Among the best UK shares or not?

It is pricey, though. Considering the latest earnings numbers, its price-to-earnings ratio is 35 times, compared to around 16 times for the FTSE 100 overall. From what I can see, there seems to be a rotation away from UK shares that performed quite well during the pandemic. It has been going on for a while, and it continues even now. The company’s share price has already ‘corrected’ quite a bit over the past year, offering almost no gains to investors. I still think that it is a buy for the long term, but also that if its price can dip more, it would be a better idea to buy it then. If I had not already bought it, I would watch it for now and buy on the dip. 

Just Eat Takeaway’s increasing revenues

Next, Just Eat Takeaway saw a brutal drop in its share price of almost 13% yesterday after releasing its 2021 results. On the face of it, the numbers here also looked good. Revenue was up by 33% from the year before. And while it is still loss-making, according to CEO Jitse Groen, it is “now rapidly progressing towards profitability”.

Why is its share price falling?

Yet the company’s share price has been tumbling fast. Over the past year, it has lost over half its value. But it was falling even before that, since the stock market rally started as the first vaccines were developed. And that is quite a while. Also, investors are probably questioning whether its acquisition of US-based Grubhub can really reap dividends. North America is its slowest-growing market right now, though to be fair, it is also the biggest. 

What I’d do

I have long liked Just Eat Takeaway. Much like Rentokil Initial, I do not think it a falling knife. Quite the contrary. I expect its share price to start rising as soon as the first profits start trickling in. And from the looks of it, that could be soon. But until such time, its share price could drop more. I would be happy to buy it but at lower levels than today. In the meantime, I am focusing on these FTSE 100 shares. 

The post Are these the 2 best UK shares for me to buy now or are they falling knives? appeared first on The Motley Fool UK.

Update pleases investors

So, it caught my attention when it rose 3.6% yesterday. This followed its positive trading update. For the full year 2021, its gross transaction value (GTV), which is the total value of orders placed on the platform, including tips and taxes, grew by 31% from the year before. It also said that losses will start reducing from next year. This is one step forward towards making profits, I reckon. But so far, the company is focused on growing market share. 

That investors view the trading update positively suggests to me that better times could be in store for the long-suffering stock. It did quite well in 2020 when lockdowns started. But as the vaccine programme started yielding results, its fortunes took a turn for the worse. And it has pretty much been falling ever since. Now however, I feel it could have fallen too far. 

Why I like the stock

I have long held the belief that this is a stock to buy for the long term. The reason is simple. As e-commerce grows even more over time, we are likely to order more from food delivery apps. The increase in popularity of all online commerce solutions has been evident during the pandemic. And at least some of this conversion to online spending might have be permanent, improving online companies’ prospects for the long term. 

It helps that the company is geographically spread out, allowing it to reach markets with high growth potential. Also, like its peer Deliveroo, the company has diversified into providing grocery deliveries, for instance, for ASDA in the UK and other supermarkets elsewhere. I also like that it has been able to manage potential labour issues well, something Deliveroo has struggled with. 

My assessment

There is, of course, the challenge that it might not be able to turn in profits quickly enough, which could test investors’ patience. Also, its revenue growth could slow down this year, now that we can eat out as often as we like. But I see this as an investment in a high-growth industry as opposed to an established one.

It is essential for it to invest to ensure a big enough market share right now, even at the cost of profits. If it reined-in investments just to boost profits, that could undermine its market position. The stock has been on my portfolio wishlist for a while, and now that it is at a low point, I think this is my opportunity to buy it. 

The post Just Eat Takeaway.com stock is down 55% in a year! Here’s why I’d buy it appeared first on The Motley Fool UK.

Looking back to the Alpha and Delta variants and the impact on the market, however, I believe I can purchase shares that will limit downside risk to my portfolio. Just Eat Takeaway (LSE: JET), the food delivery company, is an option whenever there is a remote chance of tighter restrictions – because people will have to order food to the house instead of going out to dinner. This is reflected in the order growth from 2020 to 2021, increasing 66% in the UK and 41% overall. Technically, the JET share price benefits from lockdown news and retreats when lockdowns come to an end; JET stock dropped 12.8% when the first lockdown ended in June 2020. However, New York City has capped commissions since August 2021 and the share price has been continually trending down. For me, this company is not without its risks, but the low price is why I think this is a good addition to my portfolio.

Another stock I’ll be watching closely is Fresnillo (LSE: FRES), the silver mining company operating in Mexico. The Q3 report showed lower silver and gold production and highlighted the possibility of mining being impacted by Covid-19, thus demonstrating that operations may be interrupted at certain times in the future. Nonetheless, interim earnings were up 59% and the dividend was increased in August 2021. I am also interested in this stock because silver can be a safe haven in times of crisis, reflected in the share price that has retraced 76.4% from its Autumn 2020 highs during arguably the toughest part of the pandemic. Recent price action shows a tentative uptrend support line, which will need to hold the price at a future point to be confirmed. 

Finally, Scottish Mortgage Investment Trust is an interesting stock to consider for wider exposure to tech companies. Its performance during pandemic times is nothing short of extraordinary, with around a 300% increase in share price since April 2020. This is a reflection of how well the tech sector has performed, but I will be looking in detail at its holdings before I make any purchases. While the holdings are geographically diverse, spanning the US and China, there are certain stocks included in the Scottish Mortgage Investment Trust that I will be checking out to make sure they do not negatively impact the share price, like Tesla and Meta.

The post Omicron variant: 3 cheap UK shares I’ll be buying to navigate the crisis appeared first on The Motley Fool UK.

Why has the FTSE 100 stock fallen?

Some correction in the share price was expected. The company was a star stock last year during the lockdowns. We could not eat out so we ordered in, which was a great time for delivery stocks. The Just Eat Takeaway share price rose to new highs in a matter of months after the lockdowns began. But the gains were short-lived…

The stock started plunging as soon as the stock market rallied on vaccine development in November last year. It has dropped around 45% since. While there have been periods of gains, the broad trend is downwards.  

Why this could change

However, I reckon that could change soon. In fact, it already is. In early trading today, the stock has made some gains and was even one of the biggest FTSE 100 gainers. The overall index is jittery today on news of the new coronavirus variant. The stock has since settled back a bit, but if this situation continues, I expect to see more increase in its share price over the coming days.

Just Eat Takeaway’s valuations are attractive

Even otherwise, the company does not look overvalued to me. It is a loss-making stock, which can be quite typical for those in fast-growing sectors. As such, the conventional valuation measure — the price-to-earnings (P/E) ratio — does not apply here. In lieu of that, I considered the price-to-sales (P/S) ratio, which is at 4.2 times. This is slightly higher, but still comparable to its FTSE peer Deliveroo, which trades at 3.7 times. I also compared it with another FTSE 100 e-commerce stock, Rightmove, just to get a better sense of where we are at. Turns out, that has a P/S of more than 24 times. So clearly Just Eat Takeaway looks severely undervalued by comparison. 

Besides this, its sales numbers still look quite strong. Even if the variant concerns turn out to be a false alarm, I expect the company to perform well. 2022 should be a year of recovery and that could increase consumer expenditure across categories, including food delivery orders. 

The concerns and my takeaway

There are concerns about the performance of Grubhub, which it acquired last year to gain a foothold in the US market. So far, growth in the US for the company has been far slower than that for its other markets. Considering that it is one of the biggest markets for it by orders, this is disappointing. 

But then, I do believe that it is too soon to write it off. If nothing else, I would wait and watch. But the share price is at such low levels, even considering the Grubhub challenge, I would buy it. 

The post Why I’d buy this crashing FTSE 100 stock on a dip now appeared first on The Motley Fool UK.

This was evident in Just Eat Takeaway’s share price, which touched all-time highs in July last year. But 2021 has not been so kind to these stocks. The Just Eat Takeaway share price is down by 36% from last year. Deliveroo was not publicly listed last year, but its debut at the stock markets earlier this year was as underwhelming as they come. 

So why am I talking about buying them now?

Unrealised value in delivery stocks

That is because I think there is a lot of potentially unrealised value in them, making them bargain stocks. The pandemic has accelerated the move towards digital shopping. And some of these gains are widely expected to be permanent. This is also evident in Deliveroo’s latest update. 

The company had initially expected gross transaction value (GTV), which is the sum of consumer spending through the app less discretionary tips, to grow by 30%-40% this year. This forecasted growth rate was lower than last year, on the expectation that we would be out and about once again this year. But spending so far has been so strong, that Deliveroo just increased its GTV growth forecast for the second time to 60%-70%.

Just Eat Takeaway has also reported a robust rise of 37% in GTV for the first nine months of the year compared to last year. In the third quarter its growth has slowed down, but even then it remains quite strong at 23%.

Expanding fast

Moreover, I really like how ambitious both companies are in growing their markets. Just Eat Takeaway for instance, was formed as a merger of the UK’s JustEat and the Dutch Takeaway.com. The combined entity then acquired Grubhub to grow its footprint in the US market. It has now acquired Slovakia’s Bistro.sk, which is a market leader there. 

Deliveroo for its part has tie-ups with supermarkets like Waitrose to deliver groceries. And has recently also entered into a partnership with Amazon Prime, which allows Prime customers free use of Deliveroo’s delivery service. This has already reaped good results for the company. 

What I’d do about these bargain stocks

Despite these developments, the companies remain firmly underpriced, in my view. I already talked about Just Eat Takeaway’s share price decline. Deliveroo, too, is now trading close to where it started when it first got listed. This is a competitive market, to be sure. And better terms for delivery riders has been a big issue to address too.

But they continue to address these challenges and grow at speed. I find that hard to ignore. In time, I have little doubt that they can start turning net profits too. I have bought Deliveroo shares, and am now planning to buy Just Eat Takeaway’s shares as well, while they are still beaten down bargain stocks.

The post 2 beaten-down bargain stocks I’d buy for my investment portfolio appeared first on The Motley Fool UK.

Why Deliveroo’s share price could rebound

Here’s why I’m interested in Deliveroo shares today:

• It has the bit between its teeth. The Deliveroo share price got off to a stinker following the company’s IPO back in March. But it steadily gained traction thereafter on the back of some impressive trading numbers. It upgraded its full-year guidance back in July, and its latest update showed revenues rocket 82% between January and June. More forecast-beating sales could give Deliveroo’s share price fresh doses of rocket fuel.
• Service expansion rolls on. Deliveroo continues to build its restaurant base at a feverish pace to win business from hungry customers. In the second quarter alone it added another 10,000 sites to its books. It is also continuing to build its grocery business and more recently it teamed up with Boots to offer home deliveries on hundreds of health and beauty products.
• Online food delivery is tipped for more explosive growth. Deliveroo’s profits rocketed as the broader online food delivery market ballooned following the Covid-19 breakout. Industry forecasts suggest that the market will keep growing at a tremendous rate too. Statista expects the UK online food delivery market to to be worth $15.9bn by 2025 versus $11.1bn today.
• Delivery Hero grabs a slice. News that German food delivery colossus had acquired a 5.09% stake in the business helped Deliveroo’s share price hit their peaks last month. It’s not a surprise as to why, as it’s fed speculation that a full takeover could be coming. At the very least, multinational mammoth Delivery Hero could help the UK share gain traction in its own markets.

Here’s what I’d do now

There’s clearly reasons to be bullish on the food delivery giant, then. But I for one won’t be buying Deliveroo shares following the price drop.

I’m concerned about the huge investment costs the business is incurring to build its platform, expenses that mean City analysts don’t think it will make a profit until 2024 at the earliest.

It’s likely that Deliveroo will need to keep splashing the cash to take on its rivals as well. The business now has more food merchants on its books than any other service. But competition from the likes of Just Eat, Uber Eats, and a gigantic list of smaller operators is immense and poses a big threat to future profits.

Meanwhile, criticism of Deliveroo’s employee practices continues to rumble on in the background. And this could eventually force the company to make changes that could significantly push up labour costs. Concerns over this smacked the Deliveroo share price shortly after its March 2021 IPO and could do so again.

The post Should I buy Deliveroo after its share price drop? appeared first on The Motley Fool UK.

This indicates continued investor optimism, and in the absence of any unmanageable risks, bodes well for it too. A number of stocks look good in this environment. But two of them have recently caught my attention as good potential buys. 

#1. Bunzl: robust financials

The FTSE 100 distribution services company released an encouraging half-year report for 2021 recently. It showed a 6.3% revenue increase and 12.3% pre-tax profit rise. Bunzl (LSE: BNZL) supplies disposable consumer products, including those used for catering and hygiene. This means that some of its business sagged during the pandemic. However, there was an uptick in demand for personal protection products. This second trend held it in good stead. 

In fact, it expects “enhanced hygiene trends” to be a growth driver during the remainder of the year too. It adds to the overall buoyancy expected from the economic recovery. Another positive for Bunzl is that it pays a dividend, with a yield of around 2%.

However, its share price has run up a fair bit. As per my estimates, its current price-to-earnings (P/E) ratio is north of 40 times. This makes it pricier than some other promising FTSE 100 stocks, suggesting that a bigger dip can be in store for it as investor attention is turned to cheaper stocks for now. In September, I will wait for its price to dip further and buy it then. 

#2. Just Eat Takeaway: share price dip

The share price for the food delivery app Just Eat Takeaway (LSE: JET) fell by 6% in the past week. Its share price has recovered slightly in today’s trading so far, but whether it sustains the improvement remains to be seen. 

A couple of developments could be weighing on the stock. One, it is expected to exit the FTSE 100 index soon as it is more of a Dutch than a British company. Two, the New York City Council just imposed caps on the commissions charged by such apps. The company recently acquired Grubhub which could be hit as a result, since it accounts for 37% of the city’s sales through food delivery apps. Growth in the US market is already slowing down. And the company is loss-making at present as well. Lack of pricing power adds to this mix of challenges.

Nevertheless, I think it is still growing quite well and the food delivery market has much potential that can be realised in the coming years. Moreover, its share price has crashed in the past year, down by 25%, making it a far more affordable stock now. Going by how rewarding it has been for me to hold the stock of its peer Deliveroo, so far, I am encouraged to buy Just Eat Takeaway in September. 

The post 2 FTSE 100 shares to buy in September appeared first on The Motley Fool UK.

So should I buy now? Well, I’m still going to monitor the share price. I reckon the company is facing some headwinds, which could impact its growth prospects. Here’s why it remains on my watch list.

The news

Last week, New York City Council approved legislation to permanently cap commissions online food delivery firms can charge restaurants. This is going to impact the likes of Just Eat and competitors such as Uber Eats.

The new bill means that the FTSE 100 company will only be able to charge restaurants in the region of 15% on food orders and 5% for marketing. This news comes after restaurants have been temporarily closed to eat-in customers during the pandemic and have had to pay commission charges as high as 30%.

Concerns

This doesn’t bode well for Just Eat. It purchased Grubhub to gain exposure to the US food delivery market. But it now has to contend with this issue. So what does this mean? Well, its revenue and profit potential is likely to be limited in the region. This means it will have to rely on volume growth rather than increasing its fees.

So far, New York City hasn’t enforced the bill as law. But if it does, I wonder how long will it be before other regions in the US might follow suit. In fact, this could even extend to other cities worldwide.

If this did happen, it would hit Just Eat’s revenue and profitability prospects. It would also make its acquisition of Grubhub seem expensive as it deals with this new legislation.

What happens now?

Grubhub has said that “this permanent price control is flagrantly unconstitutional and will hurt local restaurants, delivery workers and diners across NYC. We will vigorously fight this illegal action”.

I guess Just Eat’s competitors will be appealing this decision too. Of course this will take time and there’s no guarantee anything will come of it. But what it has done is create a headwind for the company and the online food delivery sector.

Results

This comes after the FTSE 100 firm announced its half-year results earlier this month. Revenue growth was strong at 52% with the help of the Grubhub acquisition. Sales improved across all regions and it delivered strong revenue performance in the UK and Germany. The momentum experienced last year seems to have continued into 2021 so far.

But profitability for the six-month period took a hit. Increased marketing costs and tight labour markets in the US reduced profits.

Should I buy?

As I said, I’m worried about the headwinds the FTSE 100 company is facing right now. Increased investment and costs are eating into profitability. And those commission caps in New York City could be a huge issue if they spread to other cities. For now, I’ll continue watching the stock.

The post This FTSE 100 stock fell 7% on Friday. Should I buy? appeared first on The Motley Fool UK.