It’s common to see more volatility on the FTSE 250 than the FTSE 100. With smaller market-caps, moving the share price of stocks on the 250 takes less.
But a 70% rise in less than 10 months is impressive, whichever way you look at it. Those kinds of gains usually put stocks in overbought territory. But even with the growth, this particular stock’s still down 40% in the past three years.
Which makes me think there’s still some gas in the tank. Let’s take a look.
Rare recovery
Currys (LSE: CURY) was once one of the most recognised stores on the UK high street, often found squeezed in somewhere between a Greggs and a Marks & Spencer. Nowadays, it’s more commonly found among megastores, which were coupled with PC World and Carphone Warehouse until 2021. In Scandinavia, you’ll find its sister brand, Elkjøp.
Now packed wall-to-wall with iPads and flat-screen TVs, it’s hard to imagine that the original name comes from an 1884 bicycle store. A 2014 merger with Dixons Retail and Carphone Warehouse Group led to the group we know today.
Rejected takeover bid
In March, Currys turned down a £742m takeover bid from US firm Elliott Advisors. Soon after, e-commerce giant JD.com abandoned its plans to make an offer.
At the time, the stock was down more than 60% in five years. The explosion of e-commerce platforms like Amazon led to lower foot traffic in physical stores during the 20-teens. Despite launching its own online store it struggled to compete with the low prices of massive online retailers.
But the company’s confidence in its true value seems to have paid off. Although the share price dipped briefly following the rejection, it recovered quickly and has climbed 50% since.
And while the performance has been spectacular of late, some signs suggest there’s even more room left to grow. So what initiated this incredible recovery and does it have staying power?
AI, of course
Currys recently made a huge investment into marketing artificial intelligence (AI), stocking its stores full of AI-enabled devices like phones and laptops. It’s also secured lucrative partnerships to maximise the potential of this emerging technology.
It was reportedly the first retailer globally to launch Microsoft’s Copilot+PC, a system that combines AI software with keyboard features.
And it looks like the strategy has paid off. In June, CEO Alex Baldock said AI-powered products are “the single most exciting new product innovation since the tablet in 2010”.
It credited this early adoption of AI as the reason for soaring laptop sales, allegedly helping the company corner almost 50% of the UK market.
With earnings forecast to grow, Currys has a forward price-to-earnings (P/E) ratio of 10. Considering its trailing P/E’s 35, that’s a considerable expectation of growth. Its price-to-book (P/B) ratio also looks very attractive, at 0.46.
This suggests the shares are less than half their true worth.
Overall, it still looks like a bargain at current prices with more growth on the horizon. As such, I plan to buy some of the shares after payday next month.
The post A share price up 70%! Is this FTSE 250 stock still the bargain it once was? appeared first on The Motley Fool UK.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Mark Hartley has positions in Greggs Plc and Marks And Spencer Group Plc. The Motley Fool UK has recommended Amazon, Greggs Plc, and Microsoft. 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.
