Covid-19 travel restrictions were obviously a disaster for the firm, but those are now well in the past. The stock price, however, is back where it was five years ago. Could this be a huge opportunity?

Making money

It’s hard to think SSP Group isn’t in a better position than it was in 2020. For one thing, its outlets are actually open now and they weren’t back then. 

Investors might reasonably point out that despite this fact, the company is still losing money. Over the last 12 months, the firm recorded earnings per share of -3p. 

The situation now, however, is quite different. The recent loss was the result of a writedown in the value of the SSP’s assets in Italy, rather than an inability to sell products.

Importantly, the firm is making money. The company generated £334m in free cash over the last 12 months, which is a big difference from the £118m outflow it witnessed in 2020. 

On top of this, £3.5bn in sales represents a record high and a 150% increase from 2020. So there is – I think – no question things are going better than they were five years ago. 

All of this makes it look as though the stock is the kind of opportunity that comes around maybe once in a decade. But a closer look reveals something a bit more complicated. 

Balance sheet

Despite SSP’s share price being largely where it was five years ago, the company is actually around 45% more expensive. The reason is the firm’s share count has increased from 554m to 805m.

With more shares outstanding, the same price per share implies a much higher valuation of the company as a whole. So in an important sense, the stock isn’t as cheap as it was five years ago.

It’s a bit like shrinkflation. Compared to 2020, investors who buy SSP shares today still get one share and pay the same amount for it – but what they get is a smaller stake in the overall business. 

Another issue is the firm’s long-term debt, which has gone from $455m to £835m over the last five years. That’s a significant increase, especially for a company with a market value of £1.25bn.

Interest rates might be falling, but they’re still well above where they were five years ago. And that’s going to make refinancing the additional debt expensive for SSP Group.

As a result, investors need to account for the fact the debt is going to need paying off sooner or later. And that’s going to have to come from future earnings (or even more shareholder dilution).

A bargain?

Despite the stock being back where it was during Covid-19, I don’t see SSP Group as a straightforward bargain. But I do think there’s a lot to like about the business.

Travel hubs are attractive retail venues, where competition is naturally limited. And the company has a strong position in these locations, which is a very desirable asset.

I think the business is worth closer investigation. But investors need to account for the increased share count and higher debt in considering whether or not the stock is a buy.

The post Back at its Covid-19 lows, is this FTSE 250 stock a screaming buy? appeared first on The Motley Fool UK.

The company runs food and beverage outlets like Upper Crust, Caffe Ritzza, and Millie’s Cookies. That doesn’t sound like much of an opportunity, but a closer look reveals something more interesting.

Travel

The problem with retail operations is there’s too much competition on the high street. But SSP doesn’t operate on the high street – it focuses on travel locations such as train stations and airports. Competition here’s limited and – as anyone who’s ever tried to buy a sandwich in one of these places knows – prices are higher as a result. And that makes the equation far more attractive.

This comes with some unique and specific challenges. Running a food outlet in an airport means working around complex security and staffing issues and operating at unusual opening times.

SSP’s expertise in this area however, gives it unique opportunities. As well as its own brands, the FTSE 250 firm runs airport franchises for the likes Starbucks – and does so on preferential terms. 

For Starbucks, an airport is a very attractive venue to have a presence. But the procedural difficulties associated with operating in this type of environment make it prohibitively difficult. 

This is where SSP’s advantage comes in. Its specialist knowledge as the largest provider of food and beverage outlets in these venues makes it an ideal partner in this kind of enterprise.

Growth and value

SSP reckons it can achieve annual revenue growth of between 5% and 7%. This is set to be driven by higher passenger footfall and the opening of new outlets and venues.

This isn’t guaranteed though, and the possibility of passenger numbers falling during a recession is a genuine risk. That’s why UBS currently has a Sell rating on the stock. 

On an IFRS basis, the company’s currently unprofitable. That looks alarming, but it’s due to the firm writing down the value of some of its assets in Italy and overhauling its IT systems. 

These are likely to be one-off issues and analyst expectations are for earnings per share to reach 16p by September 2027. That implies a price-to-earnings (P/E) ratio of 11. 

The share price is actually lower than it was five years ago – when over half of SSP’s outlets were closed due to Covid-19. That’s clearly not the case now, but the firm’s balance sheet is riskier.

Elevated debt levels are always something to keep an eye on. But SSP does have some important competitive strengths that make it an attractive stock for investors to consider.

Foolish reflections

While investors are fascinated with artificial intelligence, SSP seems to fly under the radar. But great investments don’t have to be exciting and there’s a lot to be said for the FTSE 250 company. 

Retail’s a tough industry, but it operates in a corner of the market that’s protected from a lot of the usual challenges. And it’s not hard to see what sets the firm apart from its competitors.

On that basis, I think the stock looks interesting. It’s definitely worth a look for investors who might be considering shares in a series of otherwise uninspiring retailers.

The post This FTSE 250 retailer has a strong position in a niche market appeared first on The Motley Fool UK.

Allow me to explain why.

Some very familiar names

Having asked ChatGPT to identify the best opportunities going today, it came up with fives names. All were established businesses operating in different sectors. The latter was particularly pleasing since diversification remains the only free lunch when it comes to investing and I’d never be without it.

Of the five, BP is surely the most recognisable. Despite BP having underperformed the FTSE 100 in 2024, the bot was bullish about it, thanks to a bouncing oil price and share buybacks. Miner Anglo American was highlighted as well, no doubt as a result of the (failed) takeover bid from rival BHP. Perhaps the latter will make another offer in 2025?

Pest control firm Rentokil Initial and pharma giant GSK also cropped up.

Both of these companies have been struggling. The former recently revealed that synergies from the integration of a former rival would be hit by a two-to-three-month delay. The latter faced a nasty (but now settled) lawsuit relating to its heartburn treatment Zantac.

On a more positive note, these stocks now look cheap relative to their average valuations over the last five years.

Here’s where things get interesting

One stock selection that did take me completely by surprise, however, was travel hub caterer SSP Group (LSE: SSPG). Its shares having fallen by 66% in the last five years!

To be fair, a lot of this price destruction happened at the start of the first pandemic lockdown in March 2020. With airports and railway stations barely running, earnings (and sentiment) were always going to suffer.

So, why might SSP Group be a good pick now? ChatGPT identified booming demand for air travel and improving financial performance.

This doesn’t sound outlandish to me. Passenger numbers surpassed pre-pandemic levels in various regions last year. While understandably low for this kind of business, margins at the Upper Crust owner have also been improving.

On top of this, I’m inclined to say that the price-to-earnings (P/E) ratio of 14 for the current financial year isn’t excessive. There’s a 2.6% dividend yield as well.

Not so fast

The trouble is that a firm like SSP is exposed to multiple challenges. Geopolitical issues, industrial action, poor weather, increasing numbers of people working from home, and ever-present competition could all impact earnings going forward. The bot didn’t mention any of these. And I think they help to explain why SSP shares have barely recovered since.

More generally, I’m hesitant to automatically accept any of ChatGPT’s recommendations for the simple reason that my perception of ‘best’ may be completely different from other Fools. It depends massively on factors such as risk tolerance, financial goals, and investment horizon, to name a few.

One final moan relates to the size of the companies recommended. Most were from the FTSE 100 and arguably focused more on value for money rather than growth potential.

Does this mean that only the biggest UK businesses are worthy of attention? I definitely don’t think this is the case at all!

The post ChatGPT thinks these are best UK shares to consider buying right now appeared first on The Motley Fool UK.

As you’d expect, not every stock has risen in that time. Even a number of top-quality stocks have slumped in value recently.

I’m looking to capitalise on this by buying them for a song today and selling them for much more later down the line. Here are two of my favourites right now.

SSP Group

At first glance, SSP Group (LSE:SSPG) doesn’t look like a natural bargain. At 166p per share, the firm — which sells food and drink from outlets in transport hubs, like airports and railway stations — trades on a forward price-to-earnings (P/E) ratio of 16.7 times.

However, SSP’s price-to-earnings growth (PEG) multiple suggests that this is actually a pretty cheap stock. At 0.3, this sits well inside value territory of one and below.

The company’s share price has dropped 19% over the past three months. This is thanks to a mix of problems related to its continental operations, including strike action on France and Germany’s railways, and unfavourable currency movements.

However, most recent financials in July showed sales picking up momentum, as some earlier issues unwound and leisure-related travel picked up. With eurozone growth tipped to accelerate over the next year, I think SSP’s share price could rebound if (as I expect) revenues remain on their impressive trajectory.

The FTSE 250 firm faces high levels of competition. But I’m confident that, over the long haul, it should still grow earnings strongly. It stands to benefit from rising traveller numbers and steps to increase its geographical footprint.

Panmure Liberum analysts expect SSP to spend £160m on acquisitions this year alone.

Bank of Georgia Group

Bank of Georgia‘s (LSE:BGEO) shares are down 13% during the past three months. In fact, they’ve declined sharply from April’s record peaks as worries over civil unrest and political turbulence in the Eurasian country have grown.

Such concerns can be typical of emerging markets stocks like these. Yet on balance, I think the threat that these developments pose to the bank’s earnings are more than reflected by its rock-bottom valuation.

For 2024, Bank of Georgia’s shares trade on a forward P/E ratio of 3.4 times. Furthermore, they also deal on a corresponding PEG multiple of 0.1, based on their market value of £40.85.

At these prices, I’m tempted to think that the benefits of buying the banking giant outweigh the risks. Demand for financial services products in Georgia is soaring thanks to rising wealth levels. And given low product penetration levels, there remains plenty of scope for market growth.

Latest financials from industry rival TBC Bank underlined the banking sector’s rapid growth. Operating income and pre-tax profit there leapt 16% and 12%, respectively, in the second quarter.

As an added sweetener, the prospective dividend yield on Bank of Georgia shares stands at a gigantic 7%. I think it could be one of the best cheap shares on the FTSE 250 to consider today.

The post Down 10% or more, I think these FTSE 250 shares are brilliant bargains! appeared first on The Motley Fool UK.

Of course, there’s also been some big fallers in recent months. This includes some high-quality companies that — in my opinion — investors have been too hasty in selling off.

Such declines present an excellent investment opportunity for long-term investors like me however. By buying expertly-run businesses at today’s discounted prices, I stand to make stunning returns when (as I expect) they eventually bounce back.

Applying this strategy, here’s a great FTSE 250 share I expect to recover strongly over time and see it as worthy of further research.

Up, but still down

Shares in SSP Group (LSE:SSPG) have taken off in July following a sparkling set of trading numbers. However, over a six-month time horizon the business is still nursing heavy share price losses.

At 176.3p per share, it’s fallen a whopping 21% in total over the period.

SSP operates food and beverage outlets in train stations, airports and other travel locations. Its major brands include baguette vendor Upper Crust and Ritazza coffee shops. The firm also operates franchise outlets for blue-chip brands like Starbucks, McDonalds and Greggs.

Investors heavily sold its shares following May’s half-year trading update. Back then, it said that pre-tax profits had dropped 19% year on year between October and March. This was despite a 15% surge in revenues.

SSP’s bottom line was impacted by industrial action on the French and German railways, along with high levels of renewals in Europe and their related costs. Adverse currency movements didn’t do the firm any favours either.

Problems unwinding

But these pressures are likely to prove temporary, some analysts believe. Indeed, last month’s reassuring update illustrates that SSP may be past the worst and that conditions are improving. Then the company affirmed full-year underlying operating profit target of between £210m and £235m.

SPP said that sales rose 15% during the April to June quarter, up from 12.3% in the prior three-month period. It commented that “led by an increasing demand for leisure travel, we have seen a strong sales performance across all regions“.

A fresh economic downturn could scupper the company’s progress in recent months. So could a worsening in currency-related effects. But as things stand, the business looks in good shape to capitalise on the peak summer period and to perform strongly thereafter.

A top value stock

City analysts agree with my bullish opinion. For the next two financial years, company earnings are tipped to rise 62% and 32% respectively.

Such forecasts also leave SSP shares looking dirt cheap on paper. A price-to-earnings growth (PEG) ratio of 0.3 for this year, and 0.4 for the following 12 months, fall below the widely regarded bargain benchmark of 1.

Analysts have attached an average 12-month target price of 280.6p per share to SSP. This represents an attractive 60%-plus premium from current levels.

I think the business could enjoy rapid share price growth over the long term too, as it expands internationally to capitalise on the steady rise in traveller numbers.

The post Down 21% in 6 months, I expect this FTSE 250 growth share to bounce back! appeared first on The Motley Fool UK.

Avoiding the airlines, I was curious to see whether there were other investment options to take advantage of the return of leisure travel. What about the airports and train stations themselves?

For anyone who has plucked up the courage in recent months to book an air ticket, don a mask and head off to warmer climes, it will have come as a shock to see what has happened to our busy airports.

The days of crowded bars, restaurants and lounges are a distant memory. It is more likely that travellers passing through the UK’s regional airports in recent months will have been greeted by vacant spaces, apologetic notices on the doors of closed food outlets, and small groups of passengers discreetly attempting to avoid each other.

My own recent experience at Gatwick was, however, a little more encouraging. Whilst the cavernous South Terminal remains as a mothballed shell, the buzz at the North Terminal was definitely more upbeat. This gave me some encouragement about the sector’s ability to recover its mojo by the time summer rolls around.

For me, an alternative option for exposure to the sector can be found through SSP Group (LSE: SSP), one of the leading worldwide operators of travel food concessions, to be found in multiple airports and railway stations across five continents.

In 2019 SSP was flying high, with its share price in excess of 600p and profits of over £200m. A year later, however, the company’s activities had been decimated by the unforeseen impact of Covid’s first wave.

Management have nevertheless shown resilience and utilised government support, in the form of furlough payments and emergency loans, to tide them through the worst of the pandemic. Negotiations with landlords and a successful rights issue in April 2021 allowed them to reduce leverage and re-position the business for the post-pandemic period.

A recent trading update — on 4^th February — informed us that trading in the company’s main markets (UK, Europe and North America) had regained ground, to between 63% and 79% of 2019 levels. Nearly three quarters of its total outlets are now open again, and there are plans for new expansion. Some of these new opportunities are likely to be taking advantage of the failure of other operators over the past two years.

The company is projecting a return to 2019 trading levels by 2024 and I like the fact that its portfolio of brands is focused on the leisure (rather than business) traveller.

Whilst I don’t believe that shares will return quickly to their 2018/2019 levels – and there remains a risk that new coronavirus variants might emerge and delay the world from travelling freely again – I am confident that SSP has strong upside potential over the next 12 months.

The post I’m ignoring the easyJet share price and buying this stock instead as the world begins to travel again appeared first on The Motley Fool UK.

However, if Omicron means more lockdowns and a stock market crash or slump, I think these two share prices will be hit extremely hard. Even if Omicron makes little impact on the stock market, I’d still avoid them as I think they are poor investments.

In the line of fire

SSP (LSE: SSPG) is an operator of food and beverage outlets in travel locations, principally airports and railway stations. This puts it directly in the line of fire when there are lockdowns and even advice to work from home when possible.

The SSP share price has more than halved since the start of 2020. At the same time, debt and the number of shares in issue have both rocketed. In my opinion, this fundamentally makes SSP a less attractive investment. It makes it harder for SSP’s management to drive increasing earnings per share, simply because there are more shares and debt costs more and takes away from earnings. 

As the company is loss-making, the shares are harder to value but if I ask myself: what is the growth potential here? I just don’t see any. Even if things turn out well with Omicron, there’s limited upside. If there are more lockdowns, the downside is potentially very high. I’ll be avoiding SSP shares.

Heading for disaster? 

Continuing on a train theme, Trainline (LSE: TRN) is another share I don’t think will do well if Omicrom rolls on. Earlier this year Trainline’s shares plummeted after the UK government unveiled a state-backed rival.

This change in competition comes on top of an underwhelming IPO in the summer of 2019, which in retrospect was fortuitous timing for the backers of Trainline that got out. The ticketing platform is loss-making. 

Then when you add in £169m of net debt there’s a lot to scare me away from investing in Trainline’s shares.

Trainline does operate beyond the UK, net debt has come down recently, and revenue growth is strong, but overall it doesn’t strike me as being a potentially profitable investment. That’s why I’ll avoid the shares.

Fundamentally, Trainline’s main business may cease to exist if the UK government competition is good enough to attract public transport users.

A brighter note to end on

Just quickly and to avoid making this article all about shares to avoid, I’d be tempted to invest in Melrose, especially if it becomes significantly cheaper. Already it has a price-to-earnings-growth ratio of 0.3, indicating it could be undervalued.

However, Omicron means a bigger margin of safety may be needed as the shares could fall in the short term, as a result of investors’ fear. So I’ll wait and see what happens before buying because new restrictions could hit the industrial group hard. 

Management, though, has a sterling track record of improving industrial companies and the company has been well managed through the pandemic. I think Melrose offers far more to investors whatever happens next than either SSP or Trainline ever can.

The post Omicron could destroy these two share prices appeared first on The Motley Fool UK.

Rolls-Royce

I’ve talked a lot about Rolls-Royce and I stand by what I’ve said. It has great brand recognition, an excellent history of making good quality products. Royce has also been able to secure military contracts with both the UK and US governments, which will bring in revenue for several years to come. As a high-quality manufacturer, however, it has high operating costs and potential upsets to global supply chains knock investor confidence. This is why I believe the share price fell by nearly 12% on Friday. There aren’t many deals as good as this on the stock market and I am adding it to my portfolio as we speak.

International Consolidated Airlines Group SA (LSE: IAG)

IAG has fallen a further 12% since last week as news of the Omicron variant brought back fears of international flight shutdowns. The airline seems to be a favourite of investors who think that an end to the pandemic will bring its share price roaring back to pre-2020 highs.

The only problem with that assessment is the assumption that the pandemic will simply be announced to be over one day. The world will eventually get through this storm, but it could be years before the final cases are completely eliminated.

Between now and then, who knows how many new variants will be discovered? Even in ordinary times, IAG is a highly volatile asset. It has spent years bouncing between highs of nearly 500p and lows of just under 100p. It is currently trading near just shy of 100p, but since I’m not willing to become a trader, this is one I’m steering clear away from.

SSP Group (LSE: SSPG)

SSP is a multinational food contract service. It operates around 2,800 branded retail units in airports, train and bus stations around the world. Naturally it was hit hard by the initial Covid lockdowns. The share price has taken a further loss of around 15% over the last few days, and currently trades for 214p. However, I think that SSP will fare far better than IAG. In the years before Covid, SSP increased its revenue and its profit margins. It also paid down debt and saw steady, sustainable growth in its share price.

There is a lot of pent-up demand for both air travel and food services. But reopening small cafes domestically have far fewer issues than operating international flights. Small retail units also have much lower operating costs than airlines. Once the world gets back on track, I believe SSP is in a good position to regain its pre pandemic share price of 550p.

The future

No one can be sure what will happen because of the Omicron variant. This could be a flash crash or the start of a much longer decline. But Warren Buffett famously said “Be fearful when others are greedy and greedy when others are fearful.” I see a lot of fear right now.

The post Omicron variant flash crash: 3 shares I’m buying or avoiding now appeared first on The Motley Fool UK.

Here are three companies in three different sectors I would buy with £3k today. 

Recovery shares to buy

The first company is the construction group Balfour Beatty (LSE: BBY). This might not be suitable for all investors. Indeed, construction businesses can be risky to own because profit margins in the industry are razor-thin. As such, these corporations can struggle to pass on rising costs to customers, which can impede profit growth. 

Still, I think this company is one of the best shares to buy for its exposure to the UK construction sector. The industry is already reporting strong growth. Moreover, the government’s infrastructure spending plans should only drive growth higher in the medium term. 

As one of the largest construction businesses in the country, Balfour should be able to capitalise on this trend over the next few years. Its size should also help it navigate any headwinds at the same time. That’s why I would buy the stock for my recovery portfolio today. 

Property sector

In the property sector, I would acquire LSL Property (LSE: LSL). The property industry is one of the largest sectors of the UK economy, and LSL is one of the few genuinely diversified property businesses listed in London.

The company owns estate agent brands, provides financial services, and works as a surveyor for some of the largest mortgage providers in the country. The group is a one-stop-shop for property in the UK.

That’s why I think this is one of the best shares to buy today and would require it for my recovery portfolio. I feel that no matter what happens over the next few years, LSL’s diversified portfolio will help the business navigate any environment. 

That does not mean the enterprise is without its risks and challenges. For example, the property market could come under pressure if interest rates suddenly increase. That would curb demand for the group’s services, weighing on profitability and the stock price. 

Travel and tourism

The last company I would acquire for my recovery portfolio is SSP Group (LSE: SSPG). I think it’s fair to say this enterprise, which owns a portfolio of food and beverage outlets in travel locations worldwide, has had its business model decimated by the pandemic. Revenues for the six months ended 31 March 2021 declined 79% on a like-for-like basis. 

Considering the challenges facing the enterprise, it’s certainly not for the faint-hearted. Not only have SSP’s revenues collapsed over the past year, but it has also built up an enormous debt mountain. At the end of March, net debt, including lease liabilities, was £2bn. In comparison, revenue for the six month period was £257m. 

Management doesn’t expect revenues to return to pre-Covid-19 levels until 2024. That implies SSP is set for several years of uncertainty. So the risks of investing here are clear. Nevertheless, I would buy the stock for my portfolio because I believe it has excellent recovery potential. I think the company can outperform expectations as the global economy reopens, which could make it one of the best shares to buy today. 

The post 3 shares to buy with £3,000 for the UK recovery appeared first on The Motley Fool UK.

Desperately raising more cash

Rolls-Royce (LSE: RR) has had a year to forget. It wasn’t firing on all cylinders even before the pandemic. There were problems with its Trent 1000 engines which were piling up costs for the engineer. Now with planes barely flying, revenues have plummeted – just like the share price.

This has forced Rolls-Royce to ask investors for more money. Just recently, it has had to raise £5bn. This money will dilute shareholders who’ve already lost much of the value of their shareholdings.

My take is that investing in Rolls-Royce at the moment is a gamble. The shares are likely to fall further before any recovery (if one happens) takes hold. I think it may be too risky, even for contrarian investors.

Cheap, but not a great recovery share for me

SSP Group (LSE: SSPG) has also been hammered by Covid-19. The group, which owns food kiosks in transport hubs, has been hit by low use of public transport and therefore low footfall past its premises.

Only last month the firm was warning of “considerable” job losses. Its second-half sales fell by 86%, showing just how reliant it is on travel for sales. The group has taken measures to reduce the cash it uses up, which is sensible. Even so, cash burn is still going to be around £250m-£270m every six months.

Unfortunately, in its last annual report, it only had £233.3m of cash on the balance sheet. Debts well exceeded this, including its short term liabilities – those needing to be paid by this September. So the balance sheet doesn’t strike me as being very robust.

Any road to a recovery feels like it will be a long one. The results, I think, make that clear.

This company feels like it will face an ongoing hit from the lack of commuters. Working from home may have permanently damaged the business model. As such, although the shares appear cheap, I’d avoid them.

Another potential recovery share I’ll avoid

Intercontinental Consolidated Airlines (LSE: IAG) is the last share I’ll look at. As the owner of British Airways and other airlines, its shares have fallen because of Covid-19.

This meant it has had to launch a steeply discounted €2.75bn rights issue, something other struggling companies are having to do as well.

Bookings remain well down as travellers opt to stay at home this year or go on a staycation. Bookings across the group have only recovered to about 30% of pre-pandemic levels. The recovery looks some way off with predictions that it will take years for the industry to get back to capacity.

I think it will be a long time before any of these three ‘recovery’ shares can deliver for investors. They may appear cheap now but I’d avoid them.  

The post These stocks have had a bad year to date. Could they be profitable recovery shares? appeared first on The Motley Fool UK.