Over the past couple of weeks, the FTSE 100 index has moved into new higher ground above 8,000.
As I type on 8 May, it’s around the 8,350 level. At last, the London stock market is making decent progress.
An undervalued market?
One well-worn complaint is that British companies have looked undervalued for some time compared to many of their international peers.
Perhaps the situation is set to improve and we may see an enduring bull market capable of raising company valuations.
But is it too late to invest in FTSE 100 shares?
I don’t think so.
I believe there are some attractive stock opportunities around in the big-cap index, such as Kingfisher (LSE: KGF). Better general economic times may be ahead. So I see the company as a decent potential play on economic recovery and growth for the coming years.
It owns the Screwfix and B&Q brands, as well as others in Europe. They’re popular destinations for do-it-yourself (DIY) home improvement products, and I like using them myself.
However, the business has struggled to maintain its earnings since 2020. But that’s unsurprising given the many difficulties that affected the economy. Perhaps the biggest challenge for Kingfisher has been the cost-of-living crisis consumers have endured.
The stock price has been suppressed, and the firm has been out of favour with investors.
However, conditions look set to improve for the enterprise. City analysts have pencilled in a rebound in normalised earnings of around 17% for the trading year to January 2026.
An optimistic outlook
Despite the company posting lower sales and profits, there were several positives to take away from the full-year results report released back in March.
The directors said the business is “strongly positioned” for growth in 2025 and beyond. Costs have been reduced, and there are multiple growth drivers in the firm’s markets over the medium term.
Chief executive Thierry Garnier sounded a note of caution for the market outlook in 2024. But I reckon the stock market will likely look past near-term challenges and focus on the firm’s growth prospects beyond 2024.
Meanwhile, with the share price around 254p, the valuation looks undemanding. The forward-looking price-to-earnings (P/E) multiple is running at just over 10 for next year.
That compares well against the median rolling P/E ratio of the FTSE 100 near 14.
Big dividends
On top of that, analysts forecast the dividend to yield about 4.7%, suggesting the likelihood of chunky income for shareholders while waiting for recovery and growth in the business.
But, as with all stocks, positive expectations are never guaranteed. Kingfisher’s retailing business is cyclical, and any further downturn in the general economy may thwart the firm’s recovery.
There’s also more debt on the balance sheet than I’d like to see.
Nevertheless, Kingfisher is well worth further research and consideration right now with a view to owning some of the shares.
We’ll find out more about recent progress with the trading statement due on 21 May. I’m keen to see that.
The post 1 big-cap stock to consider buying with the FTSE 100 above 8,000 appeared first on The Motley Fool UK.
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More reading
3 heavily-shorted UK stocks that investors should consider avoiding
Best British stocks to consider buying in May
Could I make shedloads of dividend income from 8,025 Kingfisher shares?
Kevin Godbold has no position in any of the shares mentioned. 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.
