2020 was a challenging year for the First Group (LSE:FGP) share price. With national lockdowns in place, the transport operator’s busses and trains remained largely empty. And so by March last year, it had crashed by nearly 80%.

But passenger numbers have since been steadily increasing as lockdown restrictions eased. And so, over the last 12 months, the stock is up by just over 50%. Can the First Group share price make a full recovery in 2021? And should I be adding this business to my portfolio?

First Group’s rising share price

As travel restrictions have started lifting, the volume and income from selling tickets have naturally increased. In addition to this, the firm is also updating its strategy to focus entirely on the UK market. As part of this new direction,  the management team is selling the North American operations.

It recently completed the sale of the First Student and First Transit brands in the US for a total of £3.3bn. Greyhound remains the only US operation that is still owned by the business. However, it’s looking to sell this division as well.

The proceeds from this sale have already been allocated to strengthen the company’s balance sheet. Around £1.35bn is being used to pay down debts, and £336m has been contributed to the UK Bus and Group pension scheme. A further £365m will be returned to shareholders, while the rest is being retained to fund future operations and potential acquisitions.

Needless to say, this large injection of capital gives the company some breathing room after a challenging year. And with the UK vaccine rollout progressing relatively quickly, I think it’s fair to say that public transportation will slowly become safer to use in the eyes of society throughout 2021. Combining this with the boost in passenger volumes from people returning to work makes me believe that the First Group share price can recover this year.

Risks to consider

Seeing a large portion of the sale proceeds being used to pay down debt is an encouraging sign to me. That’s simply because I think the business has far too much.

As passenger volumes plummeted by 90% in early 2020, the firm was forced to tap into several lines of credit to keep the lights on. Consequently, total debt now stands at around £4.4bn, which will fall to about £3.05bn after using the proceeds from the aforementioned sale. This, of course, assumes that no additional loans are taken out in the meantime.

However, even with these reduced obligations, total debt will still represent around 75% of First Group’s capital structure. In other words, it’s still going to be highly leveraged. And thus, it adds quite a bit of risk to investors should its new UK-focused strategy fail to deliver expected results.

Bottom Line

The management team has announced that total profits for the past year should be higher than market expectations. This is undoubtedly a promising sign that the First Group share price can make a speedy recovery in 2021.

However, I remain a bit cautious about these figures as the company received multiple bailout payments throughout 2020. Personally, I’m keeping First Group on my watch list until I see how its new strategy performs. And so, I won’t be adding the stock to my portfolio today.

The post Can the First Group share price recover in 2021? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in First Group. 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.

Barclays’ investment banking arm is a bit of a drag on the company right now, and nobody has any idea of how much more in fines through regulatory investigations we have yet to see. But Barclays’ retail banking division is doing fine, it’s passing all the Bank of England stress tests with ease, and forecasts are looking good.

Now, these forecasts might be downgraded a little. But with EPS rises of 24% expected for the year just ended and 21% for 2016, we’re looking at prospective P/E multiples of only 8.7 for December 2015, dropping to just 7.2 a year later. With dividends expected to yield around 3%, rising to 3.6%, I agree with the analysts’ consensus that Barclays remains a firm long-term buy.

Retail pummelled

I see NEXT (LSE: NXT) as probably our best high street clothing retailer, with the company having put in five straight years of double-digit EPS growth. That’s expected to slow to single-figure growth this year and next, but with the company planning to pay out surplus cash as special dividends, we should be seeing total yields of around 5% and 5.3% for January 2016 and 2017, respectively.

Those high yields are boosted by the current share sell-off, with a slightly disappointing Christmas shopping period having helped push the price down to a 52-week low of 6,520p on 14 January. In fact, NEXT shares are down a surprising 16% in just the few weeks since 3 December.

The price has recovered a little from that low, to 6,755p, but I see that as still leaving the shares too cheap. The tipsters have NEXT as a buy by a ratio of two-to-one over sell, but the majority of them are neutral. I see NEXT as a nice long-term investment.

Bargain basement

My third doing brick impressions is BBA Aviation (LSE: BBA), whose shares are down 32% over the past 12 months, having slumped to a 52-week low of 158.7p on Monday. The firm offers aviation support, and its engine repairs and overhaul business has been falling behind expectations according to a trading update released in December. And there’s a 10% drop in EPS expected for the year to December 2015, which would put the shares on a P/E of 11.5, dropping to 10 based on a 14% EPS recovery currently forecast for 2016.

Dividends remain strong and almost twice covered, with a likely yield of 4.5% on the cards for the year just ended, rising to 4.7% for the year ahead.

Does BBA look like another oversold bargain to you? It does to me. Full-year results due on 3 March are keenly awaited.

The post Are Barclays PLC, NEXT plc And BBA Aviation plc Screaming Buys At Today’s Lows? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.