Forecast: in 12 months this dirt-cheap FTSE growth share could turn £10k into…

Eighteen months ago, I decided that JD Sports Fashion (LSE: JD) was the FTSE 100 growth share most likely to smash the market. So I filled my boots.

What used to be a rocket ship had fallen back to earth, as the cost-of-living crisis hit shoppers and inflation drove up the cost of labour and materials.

The trainer specialist was taking a kicking from all sides. What I thought was a brilliant recovery play is currently on its knees.

The JD Sports share price is down 30% over 12 months and 45% over two years. Despite buying on the dips, I’m down more than 20% myself.

Can this FTSE 100 stock rebound?

It took a further blow in April, as employer’s national insurance and minimum wage hikes further drove up employment costs. As if that wassn’t enough, JD Sports also found itself on the front line of Donald Trump’s trade tariffs.

Around 40% of its sales are made in North America and a large chunk of its goods are sourced from Asia. The company said the knock-on effect could be higher prices for customers, threatening sales.

The share recovered at speed when Trump started to row back on his tariffs, but results on 21 May landed badly.

JD Sports warned of a 2% fall in underlying sales in a “volatile” market and said confidence could take a hit as US shoppers face price rises linked to tariffs.

Profit drop, sales wobble

Profit before tax and adjusting items dropped 4% to £923m in the year to February, in line with previous guidance. Like-for-like sales in North America fell 5.5%, although organic sales edged up 1.4% overall. In Europe, sales grew 6.5%, helped by good weather in the UK.

Total revenue rose 8.7% to £11.45bn, but the company faces fierce discounting and falling demand for Nike products, which make up 45% of sales.

It’s not all bad news. The board is diversifying supply chains and keeping a close eye on costs. Analysts suggest that brighter days may lie ahead.

Cheap valuation, bold forecast

The 17 brokers drawing up one-year share price targets for JD Sports have set a median forecast of just under 115p. If that pans out – always a big if – it would suggest a bumper 38% increase from today’s 83p. That would turn a £10,000 investment into £13,800.

Eight brokers call the stock a Strong Buy, eight say Hold. None say Sell. I hold the shares myself and I’ve no intention of doing that.

The stock still looks cheap, trading on a forward price-to-earnings ratio of 6.75. It was cheap when I filled my boots though, and that hasn’t helped.

When JD Sports moves, it really moves. On good days it can fly, but it’s just as quick to fall out of favour. Still, I remain optimistic. Investors who can accept the risks might consider taking advantage of today’s low valuation. If the recovery does come, it could be rapid. But we can expect more stumbles along the way.

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Harvey Jones has positions in JD Sports Fashion. The Motley Fool UK has recommended Nike. 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.