The JD Sports Fashion (LSE:JD.) share price has endured a rotten start to 2024. At 108p per share, the sports retailer has plummeted 35% since 1 January. This makes it the worst performer on the FTSE 100.
JD is being battered by tough trading conditions in its North American marketplace. It released a shock profit warning last month. And demand for its premium fashions may remain sluggish if broader pressure on consumer spending persists.
Having said that, I’m wondering if now could be a great time to load up on the company’s shares. I’m focused on long-term returns and willing to withstand short-term volatility for potentially significant gains in the future.
And what’s more, JD shares look dirt cheap at current prices. In fact, I believe they could be undervalued by almost 90% at current prices.
A brilliant bargain?
I’ve arrived at this conclusion by considering the current valuations of some of the FTSE company’s industry peers. The price-to-earnings (P/E) ratios of these companies can be seen in the table below.
Company
Forward P/E ratio
Foot Locker
16.8 times
Frasers Group
9.5 times
Dick’s Sporting Goods
13.9 times
Next
13.6 times
Nike
29.3 times
Marks & Spencer
10.2 times
The table includes multinational sportswear chains Foot Locker, Dick’s Sporting Goods, and Frasers Group (which owns the Sports Direct banner). I have also included Nike: the major manufacturer also operates a large store network and e-commerce operation.
Finally, I have included Next and Marks & Spencer. These companies, like JD (and also Frasers Group), consider the UK to be their single largest market.
The average P/E ratio for these six sportswear giants stands at 15.6 times for their current financial years. By comparison, the corresponding multiple for JD Sports shares sits way, way back at eight times.
To bring the FTSE 100 company up to that industry average, it would need to be changing hands at 204p per share. That’s an 89% premium to its recent share price.
Why I’d buy JD Sports shares
A breakdown of JD Sports’ operations by geography, channel, and product segment
Source: JD Sports
“Form is temporary, class is permanent“, is a popular phrase in the world of sports. I couldn’t think of a better way to describe JD Sports and its investment case.
The global athleisure market has ballooned in size over the past decade. This is explained by evolving fashion trends and lifestyle shifts, where people are seeking out comfortable, utilitarian clothing that can be worn at the gym, at home, and increasingly in the post Covid-19 landscape, at work.
Demand for high-priced sportswear has grown especially strongly, and is tipped to continue stomping higher by industry analysts.
It’s a trend JD is well placed to continue capturing through its focus on the world’s most desired (and especially expensive) brands, and the tight exclusivity arrangements it has on many product lines. This model means that it continues to win market share today.
The firm has also exploited this growing market through rapid expansion across Europe, North America, and Asia in this time. It has also invested heavily in its online channel to great success to capitalise on the e-commerce boom.
I’ll be looking to buy JD Sports shares when I next have cash to invest.
The post At 108p, I think this FTSE 100 stock could be 89% undervalued! appeared first on The Motley Fool UK.
Should you buy JD Sports shares today?
Before you decide, please take a moment to review this first.
Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.
It’s called ‘5 Stocks for Trying to Build Wealth After 50’.
And it’s yours, free.
Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.
And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.
That’s why now could be an ideal time to secure this valuable investment research.
Mark’s ‘Foolish’ analysts have scoured the markets low and high.
This special report reveals 5 of his favourite long-term ‘Buys’.
Please, don’t make any big decisions before seeing them.
Claim your free copy now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Is the falling JD Sports share price an opportunity for me to buy more shares?
2 FTSE 100 shares I’d love to buy for my Stocks and Shares ISA!
FTSE 100 shares look dirt-cheap and I’ve just bought these 3 unmissable bargains
A high risk, high reward FTSE 100 stock?
British shares look cheap. Here are 3 I’d snap up!
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Nike. 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.
