After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

Shares in JD Sports Fashion (LSE: JD.) have tanked recently. Yesterday (21 November), the FTSE 100 stock plummeted 16%. Since mid-September, it has fallen around 40%.

Is there value on offer after the recent pullback? I think so. In my view, this stock is a steal at current levels.

I’m an investor here

I have a small position in JD Sports Fashion. I bought some shares a few months ago as I was looking for exposure to the athletic footwear market.

It’s fair to say the trade didn’t go as planned. Since I bought in, the share price has tanked.

This is why I always build up positions in companies slowly over time. If I’d gone ‘all in’ on JD a few months ago, I’d now be sitting on a heavy loss instead of a manageable one.

Why I invested

I’ll look at why the stock fell 16% yesterday in a minute. First though, I want to explain why I invested here (it’s always a good idea to go back to one’s notes and look at why we invested in a stock in the first place).

For me, the key factors were:

JD offers exposure to the fast-growing athletic footwear and athleisure markets.
The group sells multiple brands including Nike, Adidas, Hoka, and On.
The company is aggressively rolling out stores across the world.
It has a large presence in the US, which has a strong economy.
The valuation was attractive.

When I bought, I noted that the shares were volatile. I just wasn’t expecting this kind of drop.

What has changed?

Looking at those bullet points, nothing has changed. Except for the fact that the valuation is now even more attractive.

Yesterday, the group posted its Q3 trading update and the market didn’t like it. But the report wasn’t terrible. For the quarter, group organic sales growth was 5.4% with 10.4% growth in Europe and 5.9% growth in the US. During the period, the company opened another 79 stores.

The issue was that trading was volatile due to unseasonable weather (it has been warm in the US recently) and cautious consumer behaviour (the US election may have been a factor here). As a result of this volatility, the company said that it now expects full-year profit to be at the lower end of its guidance range (£955m to £1,035m). That’s not ideal. For me though, the lower end of guidance is not a disaster.

I see value here

After the recent share price, the stock looks really cheap to me.

For the year ending 31 January 2026 (next financial year), analysts expect JD to generate earnings per share of 15p. Let’s be cautious and say that it does 75% of that which is about 11.3p.

At today’s share price of 95p we have a forward-looking price-to-earnings (P/E) ratio of just 8.4. That’s a low valuation.

Will I buy more shares myself? Maybe. I haven’t decided yet.

I do think the shares are a steal at current prices. However, I’m happy with my position size given the uncertainty over consumer spending in the near term.

Meanwhile, there are a lot of other opportunities in the market I’ve got my eye on. I have a little more conviction in some of these other ideas.

The post After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me appeared first on The Motley Fool UK.

Should you buy JD Sports shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

More reading

Edward Sheldon has positions in JD Sports Fashion. 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.