The Ocado (LSE: OCDO) share price is down heavily today. That’s despite the company reporting what appears to be a fairly robust set of full-year numbers. What’s going on?

Revenue up

Let’s focus on the good stuff first.

At £2.5bn, revenue for the 12 months to 28 November was 7.2% higher than the previous year. As one might expect, the vast majority of this came from retail sales via its joint venture with Marks & Spencer. One thing that’s particularly worth highlighting here is that sales were also 41.5% higher compared to pre-pandemic levels. This, if anything, goes some way to endorsing CEO Tim Steiner’s belief that online grocery demand is “here to stay”.

Away from its retail arm, Ocado opened five of its high-tech Customer Fulfilment Centres (CFCs) over the period. Seen by many investors as the reason to own the stock, two of these were located in the US. This, in turn, helped revenue from its international solutions arm soar over 300% to £66.6m. A total of 13 sites are now up and running around the world.

What’s got investors so frustrated?

Unfortunately, the company hasn’t been immune to worker shortages. A lack of HGV drivers served as a growth headwind in the second half of the year. A fire at its Kent distribution centre last July also reduced capacity. 

Collectively, these factors — combined with the ongoing costs of developing its tech — may go some way to explaining why the Ocado is out of favour again today.

Ocado share price: opportunity or warning?

Taking into account today’s significant fall, the Ocado share price has now tumbled 23% in 2022 alone. The performance over the last 12 months is even more depressing for loyal holders. No less than 56% has been wiped off the company’s value.

As someone focused on growing wealth over the long term, should I see this as an opportunity to build a position?

Looking at the positives, it’s clear that Ocado’s tech is in demand with a total of nine CFCs due to open in 2022. Assuming the company really can help partners “go-live quicker, at lower cost and achieve higher margins and returns on capital“, I can only see this annual number rising in future years.

The company is also proving increasingly popular with shoppers. Customer numbers rose 22% over the last financial year and orders rose nearly 12% to 357,000. 

On the flip side, a £9bn valuation remains lofty considering this company made a loss of £177m in 2021 due to increased investment. And even if Ocado made all the right moves from here, there’s a possibility that shareholders could see the value of their holdings fall further in 2022 as the market grows increasingly averse to ‘jam tomorrow’ companies.

A safer bet?

The awful performance of the Ocado share price in the last year is further evidence that no investment is risk-free. It also highlights that sentiment towards even the biggest UK companies can quickly reverse.

Personally, I’m in no hurry to buy this beaten-down stock today. In fact, I’d be more inclined to buy a slice of market-leader Tesco.

While lacking Ocado’s technical know-how and growth prospects, its forecast £60bn revenue is 24 times that of its FTSE 100 peer. It has its own risks, but may also be regarded as a better option for coping with inflationary times due to its pricing clout and 3.7% dividend. 

The post What’s going on with the Ocado share price? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group and Tesco. 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.

Next month will see online fashion giant Boohoo (LSE: BOO) release its latest set of interim numbers. Will these be good enough to help the share price recover and possibly soar? As a holder, I’m certainly hopeful. So, let’s look at why this may and, importantly, may not happen. 

Boohoo share price: ready to rise?

My first reason for thinking the Boohoo share price may be about to rebound relates to current trading.

Assuming that its customers have swapped lockdown threads for party clothes, I wonder if September’s results may prompt an increase in full-year guidance. Boohoo has developed a habit of under-promising and over-delivering over the years but chose not to raise targets when it reported on Q1 trading a few months ago. Now that we’re all free to socialise once more, I’m optimistic it could surprise on the upside again.

There have certainly been indications that business is still booming. Earlier this month, the company announced that it would be investing £500m in the UK over the next five years. In addition to employing 5,000 more people, Boohoo said that it would be further investing in warehouse space and technology. If that’s not indicative of a business in rude health, I don’t know what is.

Tempting valuation

Another reason for thinking the stock might rally is that the company’s valuation has fallen too far. The Boohoo share price is down 17% year-to-date. Based on analysts’ projections, that leaves this top growth stock trading on 26 times earnings.

That’s not exactly cheap. However, BOO also has a price-to-earnings-growth (PEG) ratio of just above 1. Anything around or below this level suggests investors like me are getting a good deal for our money. And with all its recently acquired brands giving access to new markets (such as homewares and cosmetics) and customers, I really don’t think expansion will be an issue.

I’m clearly not alone in thinking that Boohoo should bounce back strongly in time. Non-executive director, Iain MacDonald, bought over £300,000 worth of stock (at a higher price) back in June. It’s surely a good sign when those with an intimate knowledge of the company are investing their own cash.

The flip side

For balance, it’s vital to briefly consider what things may continue to hold the Boohoo share price back. 

There’s a possibility that recent trading may actually disappoint. After all, rival ASOS tumbled back in July after announcing a slowdown in sales. Boohoo could conceivably do the same. Whether this happens or not, confirmation of an online sales tax would be another headwind for the AIM-listed firm.

Despite considerable efforts to address ESG concerns, more damaging headlines can’t be ruled out either. Quite what this would mean for Boohoo’s management is debatable. A significant minority of holders recently opposed the re-election of co-founder Carol Kane to the board following last year’s supplier scandal.

Good probability

On balance, I’m quietly confident that the Boohoo share price has a better chance of recovering next month than dipping further. As such, I’d feel comfortable adding to my stake before August is over.

Then again, it’s the company’s long-term prospects I really care about. On this front, I fully expect the stock to be considerably more expensive in, say, five years’ time. And isn’t increasing one’s wealth slowly but surely what Foolish investing is all about?

The post Will the Boohoo share price recover in September? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo 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.

None of this has stopped me from continuing to buy growth stocks for my own portfolio though.

Contrarian growth stock

After sitting on the sidelines for a while, I’ve finally grabbed the bull by the horns and snapped up shares of online holiday firm On the Beach (LSE: OTB).

Devoid of the high fixed costs endured by larger peers such as TUI, OTB’s flexible, online-only business model ensures it has minimal cash burn while travel restrictions remain in place. A recent £26m share placing also gives the company sufficient financial firepower for a big marketing push when rules are relaxed and demand for holidays explodes.

This isn’t to say that taking a position now is without risk. Those restrictions will likely be in place for a while yet. Moreover, the barriers to entry into this market aren’t particularly high.

Nevertheless, the progress of vaccination programmes leads me to think that the risk/reward trade-off is far better than it used to be. OTB’s share price is also down roughly 40% since March. This gives me what I feel to be a decent margin of safety. I’ll be continuing to drip-feed my money into this growth stock over the next few months. 

Buying the dip

I simply couldn’t finish July without adding to my stake in fast-fashion giant Boohoo (LSE: BOO). A bumpy ride over the last month, not helped by a poorly-received update from industry peer ASOS, looks to be another opportunity to acquire this growth stock at a great price.

The 20% fall in Boohoo’s value over the last six months leaves its shares changing hands for less than 26 times earnings. I think that could prove to be a steal once the company puts its ESG (Environmental, Social, Governance) concerns to bed. The negative publicity will hopefully lessen as BOO demonstrates what it’s done to put things right with its supply chain.

Sure, there are other potential headwinds. Confirmation of an online sales tax could send the shares lower, as might a simple lack of news over the next month. However, some knockout interim numbers in September may arrest this fall. Evidence that recent acquisitions are bearing fruit would provide another boost. 

Investing megatrend

My last buy this month has actually been an investment trust rather than a single company stock.

I began buying Biotech Growth Trust (LSE: BIOG) in April. Unfortunately, its shares have drifted lower since then. Reasons could include the ongoing rotation from growth stocks into those appearing to offer more value. There might also be a belief that healthcare-related funds have had their time in the sun.

Notwithstanding this, I’m confident BIOG’s managers — many of whom are medically trained — know what they’re doing. An annualised return of 17% over the last five years is far better than the trust’s benchmark. Then again, this has been at the expense of greater volatility, As such, those with weak stomachs need not apply.

Given the rate of technological progress, this area could be one of the investment themes for years. I think a diversified trust like BIOG is the best way to play it.

The post 3 UK growth stocks I’ve been buying in July appeared first on The Twelfth Magpie.

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Paul Summers owns shares in On The Beach, boohoo group and Biotech Growth Trust. The Motley Fool UK has recommended ASOS, On The Beach, and boohoo 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.

ASOS share price: a warning…

Let’s start with a bit of context. In terms of trading, ASOS has been one of the few real beneficiaries from multiple UK lockdowns. With no stores to browse, it was predictable that young consumers would gravitate towards the company’s website for their fashion fix. 

For a while, sales were buoyant as people stocked up on less formal gear to make it through working from home. The ASOS share price did very well too. It rose from a low of 1,060p in April 2020 to just under 6,000p a year later. That’s an incredible gain of over 450%!

The problem is that momentum such as this can’t last forever. When news of slowing sales came last week, it was equally inevitable that some investors would be unhappy.

Another thing that may have exacerbated the fall in the ASOS share price was its relatively small ‘free float’. This is the percentage of a company’s stock that’s available to trade on the stock exchange. For ASOS, this sits at a little less than 70%, according to Stockopedia. Most companies of its size have free floats nearer 100%. In practice, this can make moves up or down more violent.

…or an opportunity?

There’s another way of looking at this. Will any of the setbacks mentioned in last week’s update still be relevant in, say, five years? I’d be surprised. 

Yes, Covid-19 is proving a stubborn beast to beat. However, two-thirds of adults have now received both jabs in the UK. While an increase in infections is very likely as all restrictions are removed, Boris Johnson appears committed to his belief that there’s no turning back now. Supply chain pressures should also be transitory.  

On top of this, ASOS’s growth strategy should have borne fruit by then. Let’s not forget that the firm recently acquired brands such as Topshop and Miss Selfridge. These should complement organic growth and help increase the company’s share of its target market here and abroad.

Great opportunity

Having tumbled last week, shares in ASOS now trade at 26 times forecast earnings. That’s still nowhere near the sort of multiple that would get value investors salivating. However, it’s a much lower valuation than ASOS has previously traded at. Moreover, investors shouldn’t compare an online giant with, say, a struggling airline or energy provider.

Sure, things could be tricky for a while. The mooted online sales tax would be another headwind for the company. Even so, this is very much a ‘known’ risk and one management has no doubt factored into its planning. 

So, while suggesting that the ASOS share price crash now makes it the bargain of the year may be taking things too far, I do think Thursday’s reaction was overdone. I therefore consider this a great opportunity for me to build a position in a company that’ll likely be worth far more than £4bn in a few years. 

The time to buy stock in a quality growth story is when the momentum jockeys have temporarily jumped off. I think that time has arrived here.

The post The ASOS share price crash: is this now the bargain of 2021? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS. 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.

Boohoo share price: what gives?

One potential explanation for the latest capitulation in the Boohoo share price is related to concerns over whether co-founder Mahmud Kamani will be required to give evidence in a $100m lawsuit.

As reported in the Financial Times, Boohoo has been accused of using fake promotions in the US for a number of years. It’s been claimed that customers have been presented with inflated original prices. This, in turn, made discounts seem greater than they actually were. In response, the company’s claimed that Kamani isn’t usually involved in setting prices. As such, he shouldn’t be required to answer questions.

Clearly, this isn’t the sort of headline that investors (including myself) wish to see after the hits to Boohoo’s reputation over the last year or so. This isn’t the first time it’s faced accusations of this kind either. Three years ago, the £4bn-cap had its knuckles wrapped over similar tactics and the use of psychological tricks, such as countdown clocks, in the UK. 

So, could things get worse? In the very near term, it’s hard to predict which direction the Boohoo share price may go next. A cheap stock (based on growth potential) can always get cheaper. However, I remain optimistic.

Reasons to be optimistic

For one, the company still has its cheerleaders. Indeed, the Boohoo share price rose yesterday (Tuesday) following a ‘buy’ recommendation by broker RBC. Analysts there have set a target price of 410p a pop once the contribution of new brands kicks in. 

Investors might also speculate that the fall in the Boohoo share price isn’t necessarily about Boohoo. After all, shares in fashion peer ASOS haven’t been on fire recently. The AIM-listed rival has lost 15% of its value over the last three months. This loss of momentum may be due, in part, to investors taking profits after benefitting from multiple UK lockdowns and looking for bargains elsewhere.

Bargain stock?

Once normality returns however, I suspect we could see a preference for growth over value again. Strong interim numbers in September could be a catalyst for this. So too could further evidence of progress on hitting its ESG targets and successfully integrating newly-acquired brands.

On which note, it was announced today that the company would partner with Alshaya Group in the Middle East. The latter currently runs Debenhams stores in the region. The agreement will mean that Boohoo’s brands will now feature in stores from Q4, and through a local online platform from “early 2022.“ This is an interesting development considering ASOS’s similar deal with luxury store chain Nordstrom to stock its brands in the US.

Should all the above come to pass, the current valuation of 27 times earnings could prove a bargain, in time.

Naturally, none of this is nailed on. In fact, the Boohoo share price could slide again if earnings surprise on the downside, or the company continues to make headlines for the wrong reasons. Rising Covid-19 infection levels would likely hit sentiment as well. 

As ever, it pays for me to remain diversified, just in case…

The post What’s going on with the Boohoo share price? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo 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.

What’s happened?

This morning’s stonking gain is the result of yet another positive update from the laser-guided equipment manufacturer.  

Thanks to “stronger than anticipated trading” across the pond over the last six months, Somero now expects to beat its previous guidance on full-year revenue and earnings. The company had been expecting the former to come in around $100m and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to hit $31m. Importantly, this previous guidance was only given in May.

So, business is booming?

Today, Somero predicted that revenue would now hit $110m and adjusted EBITDA would be around $35m. It also expects its net cash position to rise above $33m. 

Positively, recent performance hasn’t been restricted to Somero’s main market. Elsewhere in today’s update, the small-cap stock stated that its operations in Europe and Australia had also made “meaningful contributions to growth“.

It sounds like there’s more to come too. Having enjoyed a seriously good last couple of months, it said today that trading momentum had continued into H2. With the US playing catch-up thanks to the pandemic, the AIM-listed company added that project backlogs still extend into next year. The growing need for warehouses and flat-as-a-pancake concrete floors thanks to the explosion in online shopping was also highlighted.

Would I still buy this small-cap stock today?

I think I would still buy it. There are a few reasons, in addition to the positive outlook mentioned above.

First, the valuation is still pretty tempting. While the cyclical nature of the construction industry will always be unattractive to some in the market, a forecast P/E of 15 before markets opened this morning looked very reasonable. Let’s not forget that Somero scores well on an enviable amount of ‘quality’ metrics for a small-cap stock. These include stonkingly high returns on capital and operating margins.

Second, Somero has a history of rapidly increasing its dividends. Sure, there will be the odd wobble along the way, such as last year. However, I think investors can be confident that they’ll continue receiving bumper payouts for some time to come. Although a growth investor by heart, I certainly won’t turn this income down. Since reinvested dividends contribute meaningfully to long-term returns, I’ll simply be throwing the money back at the company. 

Third, Somero isn’t resting on its laurels. The Fort Myers-based business is busy developing its pipeline of new products with the aim of expanding its market. Encouragingly, some of these are due for release in H2. I suspect there could be more positive news on this when interim numbers are confirmed in September. 

So, there are no risks?

Yet there are definitely still risks. A resurgence of Covid-19 could see construction projects delayed again. Should this happen, Somero’s status as a small-cap stock could prove a double-whammy. After all, the share prices of minnows can be very volatile in times of trouble. 

Nevertheless, I’m very encouraged by today’s news. As long as I can sit on my hands through inevitable setbacks, I continue to think this company will generate a fine return for my portfolio.

The post This small-cap stock is exploding today. Here’s why appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Somero Enterprises, Inc. The Motley Fool UK has recommended Somero Enterprises, Inc. 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.

“Exceptional financial performance”

Today, G4M said the company had delivered an “exceptional financial performance” despite the hurdles caused by Covid-19 and our exit from the EU.

Thanks, in part, to high street retailers being forced to shut up shop, revenue jumped 31% to £157.5m in the 12 months to the end of March. The number of active customers served by G4M’s multilingual, multicurrency websites grew by almost the same percentage, to 1.06 million.

It gets better. Earnings before interest, tax depreciation and amortisation (EBITDA) soared 154% to £19.8m. The latter was ahead of what analysts were expecting the AIM-listed firm to deliver.

So, what does the future hold for Gear4music? Well, here’s where things get interesting.

Beating expectations

Since more UK lockdowns look very unlikely, G4M’s management doesn’t expect trading in the first six months of FY22 to match that seen in FY21. As a consequence, profits will likely be lower. 

Taken on its own, this might be enough to generate a drop in the share price. After all, the company is effectively saying it’s hit a high note and all the good news is now priced in. However, the opposite has actually happened this morning. I think there are three reasons for this.

First, the UK growth stock had already flagged the possibility that trading would moderate, helping to cushion the blow as/when it happens.

Second, it was announced today that trading in the first quarter had been “stronger than the Board previously expected.” As a result, the company went on to say that financial results for the FY22 would now be better than first thought. 

Third, G4M’s growth strategy remains compelling. It is now preparing to launch two new distribution hubs in Ireland and Spain. These will complement those it already has in North Yorkshire, Sweden and Germany.

On top of organic growth, the company has also begun making acquisitions. Drum brand Premier and bass amp brand Eden have already been snapped up. I wouldn’t be surprised if the company continues adding to its portfolio over the next 12 months. Finances are certainly solid enough to allow this (it held net cash of £2.7m in March).

Risks

G4M’s shares were up over 4% in early trading. The question is, will these gains stick? I’m bullish for the reasons mentioned above. However, the shares are certainly not devoid of risk.

Unlike some retailers, G4M doesn’t strike me as one that most people will visit on a weekly basis. More generally, shoppers will be wanting to spend their cash on things they’ve not been able to do. Both need to be borne in mind by prospective investors. This is even more important given the frothy-looking valuation (44 times forecast earnings, before markets opened).

I also suspect a few investors will decide to bank some profit. After all, the stock has climbed over 200% in just one year! The fact that G4M’s stock is less liquid than those higher up the market spectrum might exacerbate any downward pressure as well.

On balance however, I think G4M remains a very promising UK growth stock and one I’d be happy to hold for the long term.

The post If I had £1,000 to invest, here’s a top UK growth stock I’d buy now appeared first on The Twelfth Magpie.

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Paul Summers 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.

The Boohoo (LSE: BOO) share price barely moved in early trading this morning. That’s despite the company providing what I believe to be another encouraging update on trading over the first quarter of its new financial year. Personally, I think the investment case here remains compelling.

“Phenomenal growth”

Total revenue hit just over £486m in the three months to the end of May. That’s a rise of 32% from the same period in 2020. 

According to CEO John Lyttle, this “phenomenal growth” is even more impressive considering the strong comparatives from the previous year as more people shopped online under lockdown. It also represents a 91% jump over the last two years. 

Fueled by the gradual lifting of restrictions, sales in the UK (Boohoo’s most established market) jumped by 50% to £274.6m. Across the pond, US revenue rose by 43% to just short of £132m.  

In the rest of Europe however, sales weren’t so stellar, with revenue declining 14%. This was most likely due to ongoing concerns over the pandemic. In its ‘Rest of the World’ markets, sales declined by a similar percentage.

This rather mixed performance, combined with the lack of change to guidance, goes some way to explaining why the Boohoo share price isn’t climbing today.

What next for the Boohoo share price?

Going against its reputation for increasing forecasts over the year, the company said it still expected revenue to grow by 25% in the full financial year.

I’m still optimistic that this number will be lifted later in the year and Boohoo’s share price will react accordingly. The acquisition of the Dorothy Perkins, Wallis and Burton brands should begin bearing fruit. The launch of the new Debenhams website, featuring beauty and homewares as well as clothes, also adds some product diversification to Boohoo’s portfolio.

Combine all this with those rocketing sales in the US and the opening of two new distribution centres in the UK and I think Boohoo’s valuation of 30 times earnings still looks ‘cheap’ for the growth on offer. Tellingly, the company’s PEG (price/earnings to growth) ratio is 1.1. This implies new investors are getting a good deal. 

Making amends

I’m also heartened by today’s update on the progress made by Boohoo in addressing concerns over its supply chain.

In his third report on the matter, Sir Brian Levenson said that the company was now “demonstrating a degree of due diligence which may well go beyond that which is undertaken by other retailers or in other industries.”

As a shareholder, I find this very comforting. So long as the company proceeds to publish its full (revised) global supplier list in September as planned, I suspect previously nervous fund managers will be willing to add the stock back to their portfolios. This should do no harm to the Boohoo share price.  

Happy holder

As a holder of the stock, I’m naturally biased. But it’s clear Boohoo could still face headwinds in 2021. A full re-opening could (temporarily) see fewer people heading online and wanting to spend their hard-earned cash on other things, such as foreign holidays. One also needs to keep in mind that sales in some markets could get worse before they get better, due to relatively sluggish vaccination rollouts.

With near-£200m in net cash and a runway for ongoing growth however, I’m very relaxed about staying invested in Boohoo. 

The post Why the Boohoo share price still looks cheap appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo 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.

The Marks and Spencer (LSE: MKS) share price was on the front foot this morning, despite the company reporting a huge loss as a result of the coronavirus pandemic. Should investors like me take this as a sign that all the pain is priced in and the shares are finally worth buying?

Big loss

Sure, today’s full-year numbers were never going to be pretty. The closure of high streets and multiple UK lockdowns would never be good news for the 137-year-old, former FTSE 100 firm.

Group revenue came in at just under £9bn for the 52 weeks to 27 March. This was 12% lower than in the previous financial year. MKS’s food sales continued to offset poor performance elsewhere with like-for-like revenue rising 1.3%, supported by its deal with online grocer Ocado. In contrast, revenue from its Clothing & Home ranges plummeted 31.5%.

It gets worse. Profit before tax and one-off costs fell to just £41.6m. That’s a 90% fall from the £403.1m achieved in the previous year. Once those costs are factored in, a pre-tax loss of £201.2m was reported, down from the £67.2m profit achieved in the previous year.  

Contrarian play?

The fact that the MKS share price is rising today can’t make up for the fact that the firm, from an investment perspective, has long been a losing bet, I feel. Over the last five years, its stock has more than halved in value. By contrast, the FTSE 250 that Marks features in is up 31%. In other words, investors could have achieved a far better return by buying a simple exchange-traded fund that tracks the index. But could now be the time to buy?

There are a few reasons to be hopeful. In addition to the reopening of high streets, CEO Steve Rowe’s strategy to transform the company (the Never the Same Again programme) appears to be gathering pace. The deal with Ocado is bearing fruit with M&S products now making up over 25% of Ocado’s average basket. The firm also reported growth of 53.9% in online clothing and home revenue today, helping to justify the decision to close underperforming physical stores. 

However, there are still things that would make me wary as a potential investor. 

Buyer beware

After so many false starts, I remain sceptical that Marks can succeed in attracting shoppers back to its stores. Talk of building “a trajectory for future growth” and making the company “special again” sounds great. However, we’ve been here before. The retailer needs to find and retain a lot of new customers. That’s a big ask.

There are other things I don’t like. Net debt still stands at just over £3.5bn including lease liabilities. Forget having a “strong liquidity position” — why buy M&S when there are online-only operators boasting massive financial war chests and no physical stores to maintain? Elsewhere, operating margins have been woeful for years, as have the returns on capital invested.

In addition to all this, MKS isn’t currently paying dividends. As such, shareholders aren’t being compensated for their patience. To me, this makes the opportunity cost of not investing elsewhere very high.

Bottom line

Today’s share price suggests that a lot of the pain is priced in and that MKS shares might finally worth buying. With so many better options available in the market, however, I’d wait to see signs of real progress before considering adding the shares to my portfolio.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado 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.

The Boohoo (LSE: BOO) share price has been uncharacteristically stable over the last couple of months. I think that could be set to change in May as the company reports its latest set of full-year results to the market. But in which direction will the stock go? Here’s my take. 

Boohoo share price: ready to pop?

Based on its last trading update, I think it likely that Boohoo’s latest numbers will be nothing short of stellar. Back in January, the company announced revenue growth of 40% in the last four months of 2020 with all brands performing well. Reading across from rival ASOS’s recent record results, I sincerely doubt trading has dramatically slowed since. 

Aside from the numbers, I suspect Boohoo will provide another encouraging update on how its ‘Agenda for Change’ programme is going. This was brought in to implement all the recommendations made following Alison Levitt’s independent review of the supply chain.  So far, we know that the company has taken steps to consolidate its UK supplier base. Confirmation that directors will agree to link their bonuses to the firm’s performance on Environmental Social and Governance (ESG) measures would be another step in the right direction. 

What may go wrong?

Of course, whether Boohoo’s share price rises or falls is not purely dependent on how big the numbers released on May 5 are. It also depends on the extent to which those numbers meet or exceed expectations. Those who have played the game long enough know that investing is as much about psychology as it is about anything else. The more the market asks for, the greater the chance of it being disappointed. And there will come a time when Boohoo disappoints trading-wise.

This is why I think it’s so important to consider the risks to stocks I own as much as all the reasons to hold.

Perhaps the company’s original target market may turn away when they learn it now owns more ‘mature’ brands such as Dorothy Perkins and Debenhams. Maybe they won’t care. Even if they don’t, will Boohoo’s management be successful in spinning a lot more plates than it’s been used to?

Another risk to the Boohoo share price is that online sales may moderate once coronavirus restrictions are fully lifted in June. Maybe job concerns will make people tighten their purse strings after an initial splurge. Right now, we don’t know. This is why it’s important not to get carried away on the AIM-listed giant’s prospects.

To complicate matters, the current forecast P/E of 32 is reasonable enough for a top growth stock. However, it’s still high enough to fall hard. 

No crystal ball

All of the above makes estimating where Boohoo will be at the end of next month exceedingly tricky. As such, I would never buy a stock purely to try and make money over a few weeks. That’s a trader’s strategy. Some people can make it work. Most of us can’t.

Notwithstanding this, I believe there’s a higher probability than not of a positive reaction in May. Boohoo feels like a better company than it was when its valuation peaked last June. 

Whatever happens, I won’t be selling as I did a few years ago (albeit with a healthy profit). This is a long-term growth play and I want to be a part of it. 

The post What’s in store for the Boohoo share price in May? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo 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.