The FTSE 100 has just made a comeback to 7,000 levels, but the recent crash has left me with some incredible bargains. And I’m looking to capitalise on this drop before the market rebounds fully.

The global business environment has changed considerably since 2020. While some previously prominent industries are looking at a decade of laboured recovery, several new and exciting areas have emerged. 

I’m looking for a firm operating in a growing sector with a global footprint, stable business model and steady growth. And only one share from my FTSE 100 watchlist looks like a solid option to me. 

A big FTSE 100 bet? 

Flutter Entertainment (LSE: FLTR) is a sports betting and online gambling company that operates famous brands like Sky Betting & Gaming, PokerStars and Sportsbet. The firm was formed by merging two British giants — Paddy Power and Betfair.

After recently released first-quarter results, its share price has jumped over 42%. Here’s why I’m still considering an investment at its higher price. 

During the pandemic, there was a boom in online betting activity. In the US, the monthly average sports betting amount across the country was $310m. Across 2021, the value was estimated at over $7bn a month. This 20x increase was because several states in the US legalised sports betting after 2018.

Another big factor has been the rise of mobile payments. In fact, mobile sports betting account for 84% of all transactions in the region. 

Flutter Entertainment benefited as a result. In 2021, group revenue grew 37% to £6.03bn. Across its brands, average monthly players exceeded 7m for the first time. The FTSE 100 firm also acquired several smaller betting brands across the globe.

The UK and Ireland remain Flutter’s biggest markets, accounting for 33% of total revenue. While mobile phone betting figures are lower here, offline stores still receive a lot of foot traffic. And Flutter Entertainment remains the biggest betting firm in the region. 

My concerns

There’s no doubt that online sports betting and gambling are fast-growing industries. But this also raises a few ethical concerns, especially online. The age checks are fragile on some newer websites, leading to higher instances of minors gambling. This has led to calls for tighter regulations worldwide, including an upcoming Gambling Act Review White Paper from the UK government. This could cut revenue through taxation overnight, which poses a risk.

In fact, Flutter Entertainment’s online revenue for Q1 2022 dropped 20% year on year as the company launched changes to make gambling safer. While this was offset by a 45% jump in overall revenue from the US, it’s a sign that even big FTSE 100 companies in this highly regulated sector can suffer from new regulations. 

However, I’m still bullish on this company given the popularity and global appeal of its brands. It’s already an established powerhouse in the growing US market. Its primary strategy now is to grow its player base in the region while also focusing on high-volume markets like India, Brazil and Australia.

The industry is expected to be valued at $140bn by 2028. And I expect Flutter Entertainment to play a vital role in this growth. This is why I’m considering an investment in it if the upcoming full-year results are favourable. 

The post Up 42% in 3 months! This is the only FTSE 100 stock I’d buy now appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Suraj Radhakrishnan 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.

UK-based online and mobile sports-betting purveyor Flutter Entertainment was riding high earlier this year. Indeed, Flutter Entertainment shares rose dramatically from a low of around 6,500p in 2020 to nearly double to current levels. Yet on a year-over-year basis, Flutter Entertainment shares have remained somewhat stagnant. Thus, this stock is one that’s proven even more difficult to time than most.

However, over the longer term, Flutter Entertainment shares have proven to be a solid growth bet. Trading around 350p 20 years ago, this stock has provided serious long-term growth in buy and hold portfolios. As I’m looking for a great long-term hold for my portfolio, this is a stock that’s been picked up on my screener of late.

US market key catalyst for Flutter Entertainment shares

Flutter Entertainment is a UK-based company operating a number of high-profile banners around the globe. Investors may be familiar with the company’s PokerStars, Sky Betting, and FOX Bet banners, among various others. Flutter Entertainment’s operations span the UK, Ireland, Australia, and the US. Accordingly, this is a true international play on the broader online gambling space. 

However, the US market is among the most lucrative in the world. And in this market, Flutter Entertainment is making a name for itself. The company’s FOX Bet platform has been expanding, along with loosening restrictions on online gaming in America. A high-profile partnership with Paysafe was expanded, as were the company’s growth prospects in this key market.

However, Flutter Entertainment appears to have stalled of late. Since hitting a high of nearly 20,000p in March, shares have declined approximately 30%. 

In my view, there’s not much reason for this sell-off. Sure, inflation concerns have spurred volatility in interest rates. And growth stocks have increasingly been pushed aside in favour of safer, more defensive shares of late. That I can understand. 

However, Flutter Entertainment shares certainly look to me like ones with value right now — I’m always on the lookout for growth at a reasonable price for my portfolio. The company’s currently growing revenues at a triple-digit pace. On a forward-looking basis, analysts still expect near-50% growth rates moving forward. On a price-to-sales basis, this stock is trading around 3.7-times currently. That’s not bad.

Bottom line

Flutter Entertainment shares have really underperformed over the past year, relative to their historical performance. There are many reasons for this, including how investors feel about the ethics of online sports betting.

However, Flutter Entertainment is one such company that’s currently profitable. I think that matters. In fact, I think that’s a hugely important aspect to consider. Growth is great, but unprofitable growth is something that’s hard to get behind. With gross margins in the 65% range, Flutter Entertainment shares provide plenty of operating leverage.

This company simply checks too many boxes for me to ignore. Accordingly, I’m taking a hard look at this stock right now and considering it as a speculative buy for my portfolio. 

The post Why Is the Flutter Entertainment share price falling? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool UK owns shares of and has recommended Flutter Entertainment and Flutter Entertainment PLC. 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.

Today, I’m looking at two examples from the top tier. As luck would have it, both reported on trading this morning.  

Smith & Nephew

FTSE 100 medical technology company Smith & Nephew (LSE: SN) is first up. By contrast to other members of the index, its share price is still far off its pre-Covid-19 highs. Based on the reaction to today’s Q1 statement, I think time could be running out to acquire this company at a good price.

[fool_stock_chart ticker=LSE:SN)

At $1.13bn, revenue over the three months to 3 April came in 11.5% higher on a reported basis compared to the same period last year. While some of this is the result of currency tailwinds and input from acquisitions, CEO Roland Diggelmann reflected that surgery volumes were “moving towards more normal levels in many markets.“

Importantly, all three of S&N’s franchises (Orthopaedics, Sports Medicine & ENT and Advanced Wound Management) have bounced back to growth. Tellingly, a strong rebound in revenue in the Chinese market gives some indication of how business in developed markets might perform once Covid-19 is defeated. 

Interestingly, S&N chose not to alter its 2021 guidance on revenue growth and profit margin today. I think this is prudent. After all, operations and treatments could still be impacted by a significant third wave in 2021, highlighting that no FTSE 100 stock is devoid of risk

With talk of “improving visibility” however, I’m tempted to believe we could begin to see the S&N share price really recover from here as postponed elective surgeries get the green light. A price-to-earnings (P/E) ratio of 24 looks punchy, but not after the potential growth is factored in. I’m sorely tempted to pile in. 

Flutter Entertainment

To label gambling firm Flutter Entertainment (LSE: FLTR) a recovery play may sound strange. After all, its share price has already climbed 65% over the last year. 

[fool_stock_chart ticker=LSE:FLTR)

However, like S&N, I’m inclined to think we could see more gains ahead, especially once the sporting calendar gets back to normal and retail betting outlets and stadiums are allowed to reopen.

Again, like S&N, today’s Q1 trading update made for very pleasant reading. Total revenue rose 32% to £1.49bn over the first three months of 2021. Unsurprisingly, the vast majority of this was online where player growth of 36% was also recorded. 

Unlike its FTSE 100 peer, however, this news hasn’t been quite so well received. To me, this suggests that a lot of positivity was already priced in. After all, the betting operator’s shares were already changing hands for 50 times earnings.

A predicted rise in UK coronavirus infection rates may have brought forth some profit-taking. Investors  may also speculate that people will be less inclined to place bets if they’re concerned about where levels of employment might be going once the full economic cost of the pandemic is realised.

That said, I think I’d be tempted to buy some Flutter today and add in bouts on any weakness. The growth opportunities, particularly in the US, are hard to ignore. Moreover, a price/earnings-to-growth (PEG) ratio of 1.4 isn’t excessive. Anything below 1.0 tends to be indicative of good value.

The post 2 shares to buy for the FTSE 100 recovery appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended Smith & Nephew. 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.

Having breached the 7,000 barrier last week, I’ve begun to wonder when (and if) the top tier of UK businesses — the FTSE 100 — will eclipse its 2018 all-time high (7,903) and perhaps even charge across the 8,000 boundary. 

Today, I’m looking at few arguments for why this may and may not happen in 2021.

FTSE 100: reasons to be bullish

There’s certainly no shortage of reasons to think that recent momentum might continue.

Regardless of anyone’s political persuasion and views on the overall handling of the pandemic, I don’t think there can be much doubt that the UK’s vaccination programme has been a success relative to many other nations. On paper, this should breed confidence in the ability of the economy to recover strongly.

Naturally, the more home-focused FTSE 250 gains the most here (demonstrated by its own new all-time high). Even so, there’s no lack of London-listed giants that stand to benefit from this positivity. Drinks firm Diageo should see better numbers as bars and pubs fully reopen. If last week’s great unlock is anything to go by, Primark-owner Associated British Foods should see a swift rebound in business. Gambling behemoth Flutter Entertainment stands to gain as people are allowed back in sporting venues. 

Despite the 41% gain seen in the top tier since markets hit the bottom in March 2020, I think UK blue-chip stocks still offer good value. That’s even if they arguably aren’t as innovative and disruptive as the US tech companies are. Even so, I’d much rather buy great defensive businesses at a reasonable price than a loss-making stock at a gravity-defying price.  

Then again, there are a few reasons to be cautious. 

Dips in the road

For one, it’s important to recognise that many of the FTSE 100’s members do most of their business overseas. That’s clearly handy at times when UK plc is in the doldrums. I only need to look back at how share prices reacted during the Brexit process for evidence of this.

Then again, I need to consider the probability that our biggest companies will be held back by negative coronavirus news from abroad. Airlines such as IAG will naturally weigh on the index. So too will Intercontinental Hotels Group and engine-maker Rolls-Royce. 

Another thing worth remembering is that a few sectors are heavily represented in the FTSE 100. These are finance, mining and oil and gas. If we believe that the FTSE 100 is only going up then we must also believe that the same applies to things like commodity prices. The excitement over renewable energy and electric cars could support this. Alternatively, this may priced-in to stocks like BHP Group already. 

No rush

The FTSE 100 at 8,000? I’m can’t say it won’t happen in 2021. Nonetheless, another 14% gain or so from here in the next eight months is a big ask. That’s why I think staying the course is more important than setting arbitrary targets.

Equities are likely to remain the ‘best show in town’ for long-term investors. So, while no one can say for sure whether the FTSE 100 will eclipse previous all-time highs this year, we can hope that this record will be beaten eventually. And in the meantime, those invested in individual stocks or a cheap FTSE 100 exchange-traded fund can enjoy the dividend stream that holding shares (usually) provides.

The post The FTSE 100: next stop 8,000? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended Associated British Foods, Diageo, and InterContinental Hotels Group. 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.

Takeaway profit

Online takeaway ordering service Just Eat (LSE: JE) is a leading player in this sector, with operations overseas as well as in the UK. But the firm is without a permanent chief executive, after former boss Peter Plumb departed suddenly in January after just 15 months in the job.

Plumb’s unexpected departure doesn’t fill me with confidence in the outlook for the firm. Indeed, several things worry me about this business.

Competition in this sector is rising fast. Companies such as Uber Eats and Deliveroo are changing the market. I think Just Eat’s profit margins could suffer in this environment.

Indeed, the firm’s profit margins aren’t that high to start with. In 2018, its operating margin was only 14%, which is much lower than dominant online marketplaces such as Rightmove and Auto Trader.

At about 640p, Just Eat shares trade on around 75 times 2019 forecast earnings. Analysts expect profits to double in 2020, but I’m not sure how confident we can be in such bold forecasts. In my view, the current share price carries a significant risk of disappointment.

Unhealthy figures?

Middle East private healthcare group NMC Health (LSE: NMC) operates a network of private hospitals in 19 Gulf countries.

Since floating on the London market in 2012, NMC has grown rapidly, helped by a string of acquisitions. However, this growth has come at a price. At the end of 2018, net debt was about $1.5bn, or 3.1 times earnings before interest, tax, depreciation and amortisation (EBITDA). That’s well above my preferred maximum of 2.0x.

I’m also concerned that, on average, it took the company 96 days to collect payment on customer bills last year. That seems high to me.

Adjusted earnings per share are expected to rise by about 23% in 2019, which may help to justify the stock’s price tag of 18 times forecast earnings. Personally, I think this business looks expensive when its debt burden is factored in. I think there are better choices elsewhere in the healthcare sector.

Fancy a flutter?

When bosses at Paddy Power Betfair decided to rename the group Flutter Entertainment (LSE: FLTR) earlier this year, they were hoping to resolve confusion about the group’s numerous different operating businesses. These include UK bookmakers, online sports betting, and European and US gaming activities.

Flutter’s UK profits took a hit last year, when new regulatory restrictions on fixed-odds betting terminals (FOBTs). Chief executive Peter Jackson is hoping to reignite growth by expanding in the US as sports betting is gradually legalised.

He’s also taking a punt on more lightly-regulated emerging markets — recent deals have included the acquisition of a betting company in Georgia.

In my view, this strategy carries a fair amount of risk. Competition will be intense in the US market and many states have yet to legalise sports betting. Regulation can also change unexpectedly in emerging markets.

Flutter shares currently trade on 19 times 2019 earnings and offer a yield of just 3.3%. That makes them more expensive than most rivals. I don’t think this premium is justified. I’d place my bets elsewhere in this sector.

The post 3 FTSE 100 stocks I’d sell today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Auto Trader, NMC Health, and Rightmove. 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.