Which FTSE 100 stock will be the next comeback king?

The FTSE 100 is no stranger to comebacks. Check out the movement of the Rolls-Royce share price over the last few years for evidence of that. Its stock is now up 11-fold in five years. So, anyone who had the courage to buy as we all sat at home during the first Covid-19 lockdown (and then hold on) undoubtedly has bragging rights.

I’m not sure there are many, if any, companies elsewhere in the index that can replicate that performance exactly. But there might be a few that can be considered comeback candidates.

Bottom of the barrel

Drinks titan Diageo (LSE: DGE) is one example.

Last month, I expressed my concern about the impact of weight-loss drugs on alcohol demand, not to mention the fact that younger people aren’t as enamoured with booze as older generations. Put bluntly, I just couldn’t see much in the way of a catalyst for the share price to recapture its mojo.

Since then, we’ve had an update that’s actually been positively received by the market. This appears to be down to annual profit falling by less than expected. That hardly gets the pulse racing but it’s a start.

Is this the turning point?

I still have my reservations as to whether we’ve already seen the worst. Those long-term issues won’t just go away. Investors will be wanting to see who will be permanently filling the shoes of recently-departed former CEO Debra Crew, too.

There’s also the small matter of Donald Trump’s tariffs. As things stand, the company believes it can navigate its way through this particular challenge. But who can say what the situation will be a few weeks from now?

Then again, the shares already change hands on a price-to-earnings (P/E) ratio of 17. That’s a fair bit below the firm’s five-year average P/E of 23. They also yield almost 4%.

If Diageo can keep cutting costs and deliver on its plan to push smaller pack sizes and premixed products, more investors may sniff value.

On a stronger footing

Trainer-seller JD Sports Fashion (LSE: JD) is arguably another option for contrarians. Its share price has been dogged by worries surrounding levels of discretionary spending, rising costs, and poor performance by major brand Nike. Anyone buying 12 months ago will now be sitting on a near-30% loss.

But the tide could be turning. Nike recently said that it expected a smaller-than-expected fall in Q1 revenue, boosting its shares and, by association, those of the UK retailer. Less reliance on China for producing its garments also went down well.

Then again, other retail partners like Puma and Adidas have now started to miss analyst expectations. This might explain why momentum has stalled (again).

Bargain price

Clearly, not every stock will bounce back. That’s where the term ‘value trap‘ come from.

Even so, JD Sports has weathered storms in the past, the brand is strong, and the firm is rapidly expanding into the larger US market. The last of these presents some execution risk. Then again, the shares also look dirt cheap at just seven times FY2026 earnings. I’d say that’s a pretty big margin of safety.

Given the recent great weather in the UK, this month’s trading update (27 August) will make for interesting reading. But like with Diageo, patience will be needed.

The post Which FTSE 100 stock will be the next comeback king? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc, Nike, and Rolls-Royce Plc. 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.