Member Info for Megla

That’s what I thought when I read it. It has the scale to be a 15 x earnings company, it’s getting about half that on the FTSE.

140’s today?!

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.

The financial calendar just says March on the company’s website.

I’m sure that will be updated once the date has been set.

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.

Jonny,

Look at the share price action in the run up to year end. The market did get prematurely bullish on consumer driven stocks, but that shows just how quickly the stock can move.

My own view, based on interest rates dropping more than people expect this year, is that the consumer will strengthen as we go through the year and JD will do well.

I have the current PE ratio at around 9, which is too low ASSUMING that profits do not fall again in fiscal year 2025. The initial guidance for 2025 will be key here (sometime in March) and will hugely influence the short term share price direction. The risk here is that the company low balls the guidance to avoid a repeat of the profit warning (under promise over deliver), which certainly won’t help the share price.

Some on here think the growth is over. But with the recent acquisitions and plans to open 200 new stores a year, I don’t think that is likely. If the growth was over, and profits were to remain at around fiscal 2024 levels, then I still think the company is undervalued. The FTSE underperformance is well known and although the company has no plans for a US listing currently (I’ve spoken to IR about this) pressure from investors will increase given the underperformance to US peers.

Of course there are plenty of headwinds, the min wage increase in the UK, trade route issues etc etc, so JD it isn’t without risk and it again could be a difficult year.

Just my views, no investment advice given or intended.

Personally, I don't worry about what others are doing. You don't know their strategy or time horizon. I guess Voleon Capital are betting that 2025 guidance will be horrible. Possible of course, but given a full year contribution for the recent acquisitions it isn't something I subscribe to.

Maybe it's too early to be buying consumer driven stocks, but again I'd take the opposite view with this being a big election year both here and across the pond. Once inflation drops, the pressure to reduce rates and get people spending again will be huge.

The company trades on current PE of around 10 (2024 guidance), so even assuming EPS remained similar in fiscal year 2025, the company wouldn't be overvalued. Personally, I think a PE of 10 is pitiful anyway, but that's the FTSE100 for you these days. If the company was traded on a PE of 15, would it be overvalued?!

Now if EPS were to fall in fiscal year 2025, then I guess it depends on how much the fall was to understand the impact on the share price. 2025 guidance will be key and the next driver of share price direction.

Personally, I believe the company will grow EPS in 2025 and that the consumer will be become a hell of a lot stronger as we progress through the year. When inflation drops to 2% in April (energy price driven) they'll be a huge amount of pressure to reduce rates significantly, regardless of what is currently being said.

Again only my views, but I'm expecting a new all time high within the next 24 months.

You’re going to look like a right plonker come the end of the year.

ATB

- Global interest rates starting to turn

- Cost of living crisis starting to abate

- Revenue growth still strong (despite what some posters would have you believe)

- Net cash on the balance sheet

PBT for this year is disappointing, but those stating that there’s no basis for new investors will likely look very silly in the fullness of time.

Yup, EV far too low for a growing company with a healthy cash balance.

Those selling today will likely regret it come end of year.

Sekforde, you’re missing that the Wintershall FCF from June 2023 to Q4-2024 will be used to pay the $2bln cash payment. It might not cover all of it (hence the bridge facility) but debt will close to $5bln on completion, with the ability to reduce that by $1bln year, whilst also paying divi’s and buying back shares.

It’s a monster of a deal.

You’re looking at this all wrong Sekforde. Investors don’t overly worry about Shell’s debt or BP’s. Nor will they overly worry about Harbour’s.

Why? Because they can constantly repeat earnings and FCF. Why? Because they have the size and scale to be able to do so.

Who knows what the market will value the company at, but to say it’s a bad deal is a million miles from the mark.