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Like billionaire investor Warren Buffett, I love scouring the stock market for bargains. Shopping at a reduced price FTSE 100 sharing gives me the opportunity to make a juicy return if they recover over time.
This Footsie share has fallen by more than a third in value since the beginning of 2024. Although we face ongoing risks, here’s why I think it’s a high-return stock for long-term investors to consider.
It’s out of fashion
Weak consumer spending has been blamed on retailers JD Sports Fashion (LSE:JD.) over the past year. And the tough times look far from over, given the fragile economic conditions and signs of stickier-than-expected inflation.
The sporting goods giant fell last Thursday 21 November after like-for-like sales fell 0.3% in Q3. Like-for-like sales were up 0.5% in the nine months to October, reflecting a recent deterioration in trading conditions.
One reason is due to disappointing sales in the US, now the company’s largest market. Uncertainty over this month’s presidential election has hit consumer demand, with further discounting and hurting overall take-up.
A cheap estimate
Conditions could remain difficult in 2025 and beyond, as President-elect Donald Trump prepares for new trade tariffs starting in January. Analysts at ING Bank assume that the resulting inflation could increase US consumer spending by $2,400 per year.
Against this backdrop, JD shares may look unattractive to many investors. But I think the near-term worrisome trader outlook is focused on rock-bottom valuations.
JD’s share price fell 16% following last week’s update. We are now down 37% year to date.
As a result, the company currently trades at a forward price-to-earnings (P/E) ratio of 7.9 times. To put this in context, that’s miles below the FTSE 100 average of 14.3 times.
On top of this, JD’s price-to-book (P/B) ratio – which values the company relative to what it’s worth – fell to just 1.8 times.
This is the lowest reading since 2013.
The rebind room
I think now is a good time for long-term investors to consider opening a position. The athletics market is expected to grow exponentially over the next decade, and especially at the end when JD is the industry leader.
The company expects the overall sporting goods market to grow to $544bn by 2028 from $396bn last year.
In addition, the retailer remains committed to global expansion to take full advantage of this opportunity. Ten years ago it had around 650 stores in the UK, Ireland and Europe. It now has 4,506 across its home continent along North America and the Asia Pacific.
It is on track to open another 200 stores this financial year alone. And its strong balance sheet – it had total cash of £40.8bn as of July – gives it the opportunity to continue cutting the ribbon on new stores, as well as rolling out new products. Its latest acquisition was US-based Hibbet during the summer.
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