FTSE100 Share prices have risen sharply so far this year. The UK benchmark index is up almost double digits, including dividends. And although there has been a slight decline in recent weeks, it is still trading close to its 52-week high.
Even the Bank of England has taken note, warning that investors may not be paying enough attention to risk, which could lead to a sharp correction. Yet despite general appearances, there are still many FTSE 100 companies that appear to be getting left behind.
In some cases, a falling share price may be justified. In others, a buying opportunity may have arisen. And in the case of B&M European Value Retail (LSE:BME), I think it could be the latter!
Profits rise, share price falls
Last month, the discounter published its annual results for the 2024 financial year, which ended in March. And when looking at the figures, there was a lot to be positive about.
In France, sales growth was a solid 19.2%, while underlying operating margins increased from 8.8% to 9.5%. The company’s Heron Food brand also delivered double-digit growth with rising margins. And in the UK B&M stores, sales growth doubled while profit margins increased.
Overall, the company increased its operating profit by 10.9% year-on-year to £629 million. In return, balance sheet debt fell, dividends were increased slightly and the number of store openings remained on track.
This is all good news, of course. However, it does lead to some confusion when looking at the share price, which plummeted by 20% in the following weeks. What happened?
This sell-off was not triggered by the results, but by what was not included in them. The first quarter of fiscal 2025 faces some difficult comparatives. And with management providing no insight into investor expectations, many seem to have assumed the worst, leading to a significant drop in the value of the FTSE 100 share. But now the results are in, so is everything as bad as everyone thought?
Difficult comparison values slow growth
As expected, the three months to the end of June were quite tough for B&M. As a result, sales growth slowed significantly across all three business areas. France appears to be the best performer, but only managed to record an increase of 7.5%. And B&M UK came in last with just 1.5%.
As for operating profits, it is still a mystery as management has not provided any insight. But assuming margins remained intact, it is safe to assume that profits have seen a similar decline. Against this backdrop, shareholders’ earlier concerns seem to have been justified.
However, it is also important to point out that tough comparisons are ultimately a short-term limitation. B&M is still busy expanding its store count. The company will add 19 locations to its portfolio, with a further 26 planned for the rest of the year. In the meantime, the group has just launched its new Value for every day range and is adding 500 new product lines to stores across its entire sales area.
Management seems to be taking a long-term view. And now that most of the uncertainty has been eliminated, the current low share price seems like a buying opportunity. That’s why I plan to add this company to my portfolio as soon as I have more capital available.
The post “FTSE 100 nears 52-week high, but this stock is still dirt cheap!” appeared first on The Motley Fool UK.
Further reading
Zaven Boyrazian does not own any of the stocks mentioned. The Motley Fool UK has recommended B&M European Value. The views expressed on companies mentioned in this article are those of the author and may therefore 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.
Motley Fool UK 2024
