Up 7.5% in a week but with P/Es below 8! Are JD Sports Fashion and easyJet shares ready to take off?
I’ve kept a close eye on easyJet (LSE: EZJ) shares for the last 18 months because I think it’s got serious recovery potential.
The FTSE 100 budget carrier has failed to benefit from the post-pandemic flights recovery, in contrast to International Consolidated Airlines Group. I bought IAG in April, straight after Donald Trump paused his âliberation dayâ tariffs, and Iâm up 60% since. Could easyJet now follow the same trajectory?
FTSE 100 underperformers
easyJet also took part in April’s relief rally, but wasn’t able to sustain it. The shares are down 11% over 12 months and 28% over five years, a real disappointment for long-term investors.
While IAG has exposure to transatlantic routes via British Airways, easyJet is focused on Europe, where the cost-of-living crisis and intense competition from other low-cost carriers like Ryanair and Wizz Air have squeezed fares and profit margins.
Strikes, staffing challenges, airport disruptions and fuel price volatility can all hit performance, at any time. Revenue growth has been bumpy, despite its fast-growing Holidays operation.
Low valuation tempts
The shares have jumped 7.5% in the last week as the prospect of interest rate cuts revives the FTSE 100 across the board. Despite that, the easyJet share price still looks brilliant value with a price-to-earnings ratio (P/E) of just 7.7.
On the other hand, itâs looked cheap for ages, and that hasnât helped. The UK economy is still struggling, unemployment is rising and younger people have less to spend the jobs market tightens.
On the plus side, the falling oil price and easyJetâs investment in a more fuel-efficient Airbus fleet should boost margins. I think itâs worth considering with a long-term view, but given wider economic headwinds, investors must expect more turbulence.
Long-term patience required
I havenât just watched JD Sports Fashion (LSE: JD), Iâve bought its shares repeatedly, averaging down on every dip, while hoping that one day theyâd fly back into favour.
Shares in the FTSE 100 athleisurewear specialist have also been lifted by a more positive attitude towards UK recovery stocks, up 7.25% in the last week. But the shares are still down 12% over 12 months and a brutal 50% over five years.
Today, the JD Sports share price looks brilliant value with a P/E of 6.8. But like easyJet, it’s looked that way for some time, without kicking on.
First, sales have to recover, and that isnât easy while consumers struggle and its youthful customer base finds things particularly hard. Employer’s National Insurance and inflation-busting Minimum Wage hikes have squeezed margins.
Crucially, JD Sports has suffered two disappointing Christmas trading periods in a row. Can we really say economic conditions are better this year? Iâm afraid not.
I still think itâs worth considering with a long-term view, but again, patience is required. Interest rate cuts may help, but we have to remember why the Bank of England is making them. The UK is on the edge of recession, and the US isnât exactly booming.
Both easyJet and JD Sports are trading at eye-popping valuations. Theyâre cheap for a reason though. I expect both to come good, but can’t say when.
The post Up 7.5% in a week but with P/Es below 8! Are JD Sports Fashion and easyJet shares ready to take off? appeared first on The Motley Fool UK.
Should you invest £1,000 in easyJet plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if easyJet plc made the list?
More reading
- Down 67%, is there any hope of a recovery for easyJet shares? Some analysts think so!
- With single-digit P/E ratios, here are 3 of the FTSE 100’s cheapest-looking shares!
- With Versace selling for £1bn, what does this tell us about the valuations of the FTSE 100’s ‘fashionable’ stocks?
- This FTSE 100 share has a P/E ratio less than half the index average! Is it a bargain buy?
- Is easyJet a steal at its near-£5 share price after strong 2025 results?
Harvey Jones 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.
