The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Limited risk. Good strong profitable business that accelerates JD’s presence in the US. There are always integration challenges/costs, but as the board say, it should be earnings accretive in year one.
Current price more related to the expectation that interest rates will stay higher for longer due to US inflation. It’s more challenging to cut your own interest rates (UK) in this scenario due to the risk of importing inflation (lots of goods traded in USD). And of course the guidance for this year was pretty big, bit of wait and see approach being taken by the looks of it.
Lucan,
If folk are going to bash and trash the company then its going to get a response, that's kinda the idea of the forum after all. So please don't cry mate, you'd be a big loss to the board if you left, some might say your posts are second to none.
lwhl,
not sure what you’re on about when you reference my ‘****sure economic predictions’.
taxes in the uk have already been cut - 4% reduction in ni, offset by the fiscal drag of not raising the personnel allowances.
energy prices are already back at inflated adjusted norms. see gas prices.
the us is doing well (albeit driven by unsustainable fiscal deficits).
the market is penciling in rate cuts for the second half of the year.
and uk pmi’s back in growth mode.
so they’re hardly my economic predictions are they?
Utterly clueless. UK coming out of recession, US still doing well. Interest rates to start falling this year, energy prices back to inflation adjusted norms. Taxes being cut to stimulate spending.
This is a good deal at a good time. Maybe you guys need to Google what earnings accretive means.
Why would the share price fall?! What did people expect would have happen with the billion of cash sat on the balance sheet?! Post deal, net debt will be minuscule, at year end, JD will likely have a positive cash balance.
This deal is earnings accretive from day one, with millions in synergies to be realised as the business is integrated. It really is no wonder the UK market is struggling with takes like this.
All time highs within the next 18 months in my view.
Close to a billion a year in profit (it will be more next year) and an enterprise value of less than £6bln.
Next market cap of nearly £12bln on very similar PBT numbers.
Company making close to £1bln a year (top end of guidance), has a billion on the balance sheet, opening 200 new stores a year, navigated a recession in its biggest market and trades on a PE of less than 10 (significantly less on an EV basis).
If the share price was 200p the company still wouldn’t be overvalued.
Cautious but good update. Up trend starts today in my view.
Depends on the guidance, which will likely be conservative given the profit warning debacle.
Regardless of the results, I do think the coming weeks will be the start of an uptrend for various reasons, min wage increase, energy bill reductions, NI cut, falling interest rates. That uptrend may start from a lower share price than current (depending on tomorrow’s guidance) but the consumer should get stronger as we head through the year.
So Next are expecting PBT of £960m for the coming year, with a market cap of £11bn+
JD are expecting PBT of around £920m for the current year, with a market cap of less than £6bln.
Of course everyone’s waiting for the update to ensure this isn’t the start of downward spiral, but looking at JD’s peer group here and across the pond, the company is hugely undervalued - assuming the update isn’t disastrous.
1 week to go.
PSK,
I certainly hope so, but I’m prepared to hold if not.
The market is telling me that it doesn’t believe in the consensus estimates, which given the current macro situation isn’t all that surprising. There are plenty of headwinds out there as it stands, but with interest rates likely to fall (quite aggressively in my view) and energy prices reverting back to inflation adjusted norms, the consumer should strengthen as we go through the year.
Let’s see what the 28th brings, but I would bet the share price will end the year significantly higher than it is now.
Just my views.
PSK,
Have a look at the consensus estimates on JD’s website (investor relations section).
The EPS number for fiscal 2025 is 12.85p, which is an average of 14 different analysts. Whether that number is correct or not remains to be seen. JD’s own guidance on the 28th will be the numbers to focus on.
If the analysts have this right, then the forward PE is around 8.7 and the company is massively undervalued against its US peers.
If JD guide to a much lower number, then they’ll be a reason for the current share price.
Looking at footlocker, who released guidance that disappointed the market.
Current share price $23.11.
Midpoint guidance for 2024 EPS = $1.60
Forward earnings multiple = 14.4
Equivalent JD share price on the same earnings multiple = 185p
This is everything that’s wrong with the UK market.
Dicks sporting goods released some decent results yesterday. EPS was $12.18 for 2024 with a guidance of $12.85 for 2025.
The share price rose 15% to $216 per share, which is 16.8 x forward earnings.
In contrast, JD has a consensus estimate of £11.71p per share for this year and £12.85p for next year.
Assuming next years EPS is in the right ballpark (we’ll find out in a couple of weeks) JD trades on a forward PE of 8.7 (even less if you do it on an EV basis).
A comparable share price for JD based on the same earnings multiple of Dicks, would be 215p.
Now I know there’s difference between the company’s (products, geographical locations etc) but it does highlight the pathetic valuations some companies have on the UK market.
Assuming earnings are correct and with North America likely to be the companies biggest market (by turnover) the company really needs to start thinking about moving its listing.
In my view, the share price is unlikely to have any great movement before the March update.
We have to remember, this is the first time the company has failed to grow PBT (before adjusted items) for many years. Fiscal 2024 PBT will be lower than fiscal 2022, despite revenue increasing substantially.
Revenue will likely grow again in fiscal 2025 due to the latest acquisitions and growth strategy, but the real question is, can they get back to increasing profits given the current headwinds?!
The March update will give us a first look at this. I expect the company to be cautious given the debacle of the profit warning, but hopefully it isn’t expectations of another fall. A PBT range, with the lower end being the same as fiscal 2024 would give the share price a solid foundation to build on.