Dividend yields are not terribly reliable measures these days. Recent stock market uncertainty has artificially pumped them up, like in the case of the FTSE 100 Russian miner Evraz. It had the biggest dividend yield among all the index’s constituent stocks even earlier, but now its price has plunged so much that its yield is at an explosive 100%+. Needless to say, it is still not attractive considering the risks attached to buying the stock. But not all stocks can be painted with the same brush. Like this FTSE 100 stock with a 10%+ dividend yield. 

Over-correction in the Persimmon share price

I am talking about the housebuilder Persimmon (LSE: PSN). In my book, it is an undervalued stock right now. Its share price has actually declined by 14% over the past year. Some of this was to be expected. The real estate market benefited significantly from government support during the pandemic. Most significantly, stamp duty relief led to a housing market rally, that supported housebuilders’ fortunes in otherwise challenging times. But as the stimulus was withdrawn, their share prices came off. 

I do believe, however, that the Persimmon share price has over-corrected. At present, it is trading 30% below its pre-pandemic highs, which suggests that it could rise far more from here. This is especially so considering the company’s recent results. For the full year 2021, the company saw an increase in both net profits and revenues from 2020. It has also managed to reverse the decline seen under both headings since 2019, which is particularly encouraging from a dividend perspective. As a shareholder, it is hard for me to see how it can sustain its dividends if its income falls. Now I am less concerned. 

Promising dividend yield

In its results released earlier today, the company reported it expects to maintain its dividends at the 2021 levels, at least so far. This puts both its current and forward yield at just north of 10%. Little wonder then, that its share price has jumped 4.3% this Wednesday afternoon. I do believe, though that it can rise much more. This is partly because, as I mentioned earlier, it is trading below pre-pandemic levels. But it is also because its market valuation looks subdued to me, with its price-to-earnings (P/E) ratio at around 9.5 times. This is much lower than the FTSE 100 P/E of 15 times. 

Would I buy the FTSE 100 stock?

Persimmon’s valuation is in line with other real estate stocks, which suggests to me that it may not be undervalued compared to peers. At the same time, at this uncertain time for stock markets, cyclicals like property stocks are expected to take a bit of a hit. If economic recovery does continue, however, Persimmon’s fortunes are likely to continue improving as far as I can see. Moreover, even keeping peer valuations in mind, the fact is that its P/E is lower than it was even a few months ago. I think it is a good time for me to increase my holdings in the stock. 

Manika Premsingh owns Persimmon. 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.

Key points

• The Novacyt share price soared from 20p in January 2020 to 1,194p in October 2020 as the firm rolled out testing kits for Covid-19
• The company is in a dispute with the Department of Health and Social Care over a contract cancellation
• Its cash position for 2021 is £101.8m, up from £91.8m a year previously

An Anglo-French biotechnology company, Novacyt (NCYT) specialises in clinical diagnostics. When the Covid-19 pandemic struck, the firm used its testing infrastructure to its advantage. It produced a number of lateral flow and PCR tests for use in many countries around the world. Over the past year, the Novacyt share price has fallen about 77% from its heights during the pandemic. I want to know if this price movement, and the underlying business, justifies investment in this company for the long term. Let’s take a closer look. 

Covid testing and the Novacyt share price

As the pandemic hit throughout the world, Novacyt worked hard to develop Covid tests. It was at an advantage given its speciality is clinical diagnostics. As the company ramped up its testing output, the share price climbed higher. At the end of January 2020, before the pandemic, shares were trading at 20p. As the crisis intensified, the share price topped out at 1,194p at the end of October 2020. The shares currently trade at 158.3p. 

In more recent times, the business has not been running as smoothly. It is still getting approval for its lateral flow and PCR tests, although it is unclear how much demand remains. From 1 April 2022, free mass testing will end in England. It is likely that other countries will follow, given the milder nature of the Omicron variant. I think this move away from free mass testing could negatively impact the Novacyt share price.   

The firm also has an ongoing dispute with the Department of Health and Social Care (DHSC). The dispute originates from a September 2020 deal to supply its Primerdesign testing kits for six months. The DHSC opted not to extend the contract and Novacyt says this has left it about £40m out of pocket.

Recent financial results

For the 2021 calendar year, company revenue stood at £95.8m. This was lower than the previous year’s total of £277.2m. It is worth noting, however, that this latter figure was 20 times greater than revenue in 2019. This is because of the income from the roll out of the testing kits.

Profits also declined from 2020 to 2021, falling from £176.1m to just £36m. This suggests that as the intensity of the pandemic subsides, the results and the Novacyt share price could steadily fall. It is worth noting, though, that the business had a cash position of £101.8m for 2021, up from £91.8m in 2020.

The Novacyt share price performed well during the pandemic. As conditions return to normal, however, much of its testing-related revenue will disappear. Non-Covid testing will remain, but I won’t be buying this company, owing to the downward trajectory of its results and share price. 

Andrew Woods has no position in any of the shares mentioned. 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.

Arrival’s (NASDAQ: ARVL) share price just spiked by more than 10% after its earnings call today where management released guidance for the year ahead. As such, I will be breaking down the reasons as to why the Arrival share price has gone up, and whether I will be adding more shares to the biggest position in my portfolio!

Letter of intents (LOIs) and non-binding orders DOUBLED

In a pre-revenue company like Arrival, all eyes are on the magic figure that is number of potential orders in order to guarantee future cash flow and revenue. Arrival managed to wow investors with a staggering c.134k in non-binding orders and LOIs in Q4 2021, double of what they had in the quarter before (64k), which is shockingly impressive to me. With share prices of pre-revenue companies subject to future cash flows, this will definitely bring an upside to Arrival’s target price.

Everything is on track

Denis Sverdlov and his team have managed to maintain a strict timeline following the revised outlook given in the last quarter. As expected, trial bus production and proving ground trials in Spain were successful. Bus certification and public road trials with First Group is also expected to go ahead this quarter, with British roads potentially seeing up to 193 of Arrival’s new electric buses following the completion of successful trials. Moreover, UK production of buses will start by mid-year, thus bringing in the first batch of revenue, leaving investors such as myself extremely excited.

In the other lane, public road trials for the van were successful in Sweden with more tests still being conducted. The van is on course to complete its public road trials soon, with full product certification expected in both the EU and UK shortly, along with the start of production in autumn. Arrival expects 400-600 vans to be built this year, with delivery of those vehicles to UPS and select customers, guaranteeing further revenue.

Cash in the bank

The main worry with many pre-revenue companies is whether they can sustain a healthy level of cash before achieving profitability. These worries were quashed as cash and equivalents went up to $905m following the company’s notes offering in November. With cash expected to burn at $655-755m this year, Arrival might just be able to get through the pre-revenue period without having to dilute any further as cash is expected to flood in with their first orders of buses and vans later this year.

Shortages

On the earnings call, there were concerns about material and semiconductor shortages for vehicle production. Although President Avinash Rugoobur mentioned that the electric vehicle manufacturer has stockpiled enough raw materials for production for 2022, it could still potentially face shortages in the future as lead times continue to increase. For that reason, revenue for 2023 and beyond could be at the mercy of raw materials and their prices.

Nevertheless, it was the perfect earnings call to my mind, and management really seem to know what they are doing. The company is in an extremely healthy position, and learning how to walk before running is key at this stage. For those reasons, the share price saw an increase today, and I am happy to increase my stake in Arrival.

John Choong owns shares of Arrival. 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.

The ISA deadline for saving this year’s £20,000 allowance is 5 April. One option is to put money into a Stocks and Shares ISA to use the allowance up and buy shares later. But I’ve found what I believe to be two FTSE 100 shares to buy now. So I’m not inclined to wait.

Big biopharmaceuticals

In February’s full-year results report, biopharmaceutical company AstraZeneca (LSE: AZN) delivered some decent numbers. Total revenue at constant currency exchange rates shot up by 38% for the year. But that figure included turnover from the firm’s Covid-19 vaccine.  Without the vaccine, revenue grew by 23%, which is still an impressive performance.

Chief executive Pascal Soriot said AstraZeneca continued on its strong growth trajectory in 2021. And he reckoned “industry-leading” R&D productivity drove the progress. Indeed, five of the company’s medicines achieved blockbuster status. And that means they each posted annual sales of $1bn or more.  

The R&D pipeline remains vibrant. And looking ahead, Soriot is “confident” about AstraZeneca’s long-term growth and profitability. Meanwhile, City analysts have pencilled in estimates of a triple-digit percentage increase in earnings this year followed by a low double-digit gain in 2023. It seems the company has a strong grip on its growth mojo these days.

Of course, estimates can be wrong and it’s possible for the business to miss expectations because of operational setbacks. And if that happens, the valuation could adjust lower, taking the share price with it. But with the stock near 9,224p, the forward-looking earnings multiple is just below 16 for 2023. And I’d embrace the risks of owning some of the shares now because I think the business has a bright future.

Fast-moving consumer goods

Fast-moving consumer goods company Reckitt (LSE: RKT) owns popular brands in the health, hygiene and nutrition markets. And in February’s full-year results report, chief executive Laxman Narasimhan said the company’s “journey to rejuvenate sustainable growth is well on track.”  As evidence, he pointed to “strong” like-for-like net revenue growth of 3.5% in 2021. And that means over two years, revenue has grown by 17.4%.

The outcome was ahead of the directors’ previous expectations. And Narasimhan said the company has “significantly” strengthened its business over the past two years. He reckons the “innovation” pipeline is now 50% larger and the brands are stronger and more relevant.

The company has been busy nipping and tucking its portfolio of brands — selling some and buying others. And Narasimhan described the process as “repositioning for faster growth.” But there are no guarantees accelerated growth will arrive, of course. And Reckitt’s record on earnings is a bit patchy. Nevertheless, with the share price near 6,144p, the forward-looking earnings multiple is just below 19 for 2023. And I’d embrace the risks and aim to make the stock long-term holding for my portfolio for its ongoing recovery potential.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt 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.

The year has not started off well for Rolls-Royce (LSE: RR) shareholders, with February’s release of full-year results triggering further decline. The Rolls-Royce share price lost 9.6% during the month, on top of a 10% fall in January.

We heard other news during the month, as the company completed the sale of its 23.1% shareholding in AirTanker Holdings. The disposal raised proceeds of £189m in cash. It will be used “to help rebuild the Rolls-Royce balance sheet in support of our medium-term ambition to return to an investment grade credit profile.”

On results day, 24 February, Rolls-Royce announced the imminent departure of chief executive Warren East. After almost eight years in the role, Mr East will step down at the end of 2022. The board says it will “now launch a thorough and extensive search for his successor.” That suggests to me that maybe it has come as a bit of a surprise.

Share price fall

The Rolls-Royce share price fell 13% on the day, though I thought the full-year figures looked positive. 

Rolls reported an underlying operating profit of £414m in the year. Compared to longer-term performance, that’s pretty dire. But in the horrible year that was 2021, I think seeing any operating profit at all is a cause for celebration. The year was all about improving the cash situation, and on that score, Rolls performed better than expected.

The company reported “restructuring run-rate savings of more than £1.3bn delivered one year ahead of schedule.” That seems impressive to me. And disposals are “on track with total expected proceeds of around £2bn.” Free cash flow for the year was still negative, with a £1.5bn outflow. But the company did say it was “substantially improved and ahead of expectations.” And it’s way better than the £4.3bn cash outflow recorded in 2020.

Increase in debt

Rolls-Royce’s debt situation is a worry, mind. At 31 December, net debt (including lease liabilities) stood at £5.1bn. That’s a lot, especially for a company with a market cap of £8.8bn. But at least the increase over the year, of £1.6bn, was not as high as I feared it might be.

What I take from this is twofold. One is that we’re looking at a company that I think is on its way back to decent levels of profit and to sustainable earnings growth. The other is that I reckon there’s still a long road ahead before it gets there. Progress along that road, though, has been better than I would have thought a year ago.

Management uncertainty

The negative reaction seen in the Rolls-Royce share price must surely be down to the departure of Warren East. He has provided a steadying hand throughout the pandemic. And his guidance has clearly been bearing fruit as far as progress towards recovery is going. To see the captain leaving the ship while it is still in the early days of a perilous journey… well, it does not inspire confidence.

While I find 2021 progress at Rolls-Royce encouraging, I will still wait and watch. Especially now the trusted boss is on the way out.

Alan Oscroft has no position in any of the shares mentioned. 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.

Warren Buffett is perhaps the most successful investor of all time. Worth in excess of $100bn, Buffett acquired about 99% of this wealth over the age of 50. His secret? To buy cheap growth stocks and hold them for the long term. After all, time is his greatest asset. In 1999, Buffett advised investors to “start early … I started building this little snowball at the top of a very long hill”. I’m now following two of his techniques to find cheap growth stocks. These are the price-to-earnings (P/E) ratio and compound annual earnings growth. Let’s take a closer look.

The techniques of Warren Buffett

A trailing P/E ratio is calculated by dividing the share price by the earnings. For a forward P/E ratio, we look instead at forecast earnings. The result, compared with competitor companies, may indicate if the firm is under- or overvalued. 

By way of example, one of Warren Buffett’s recent acquisitions is gaming company Activision Blizzard. This business has a trailing P/E of 23.67 and a forward P/E of 22.37. Compared to a major competitor, Playtika, Buffett’s purchase may be a bargain. Playtika has respective ratios of 27.47 and 23.75.

Earnings-per-share (EPS) is another important metric for Warren Buffett. This essentially tells investors how profitable a company is per outstanding share. I have previously covered the formula for calculating compound annual EPS growth rates elsewhere, but it measures the constant rate of return over a given time period.

One of Buffett’s largest holdings, Coca-Cola, has had a compound annual EPS growth rate of 10.6% over the last three calendar years. He will also be checking that management is reinvesting its ‘retained earnings’ in a responsible way.    

Two companies that fit the bill

Based on all this, the first business I’m looking at is Pan African Resources, a gold miner operating in sub-Saharan Africa. Its compound annual EPS growth rate of 8.3% is strong enough for me to look deeper. The company is also expanding, internally funding the extension of the life of its Evander Mine by 13 years in the past year. It’s worth noting, however, that any pandemic resurgence could halt mining operations.

Furthermore, its trailing P/E is just 7.02. This is much lower than major competitor Petropavlovsk that has a trailing P/E of 41.49. With a current share price of 22.4p, I find Pan African Resources very attractive based on Warren Buffett’s principles. 

The second business is Renew Holdings, a support services firm specialising in construction and engineering. Its compound annual EPS growth rate over the past five calendar years is 6.3%. While this is not as high as Pan African Resources, it is certainly competitive and consistent. However, the firm posted net debt of £13.7m for the 12 months to 30 September 2021, down from a net cash position of £300,000 in the previous year. 

Its forward P/E ratio, of 12.41 at a current price of 680p, is significantly lower than Balfour Beatty‘s. The latter is a competitor and has a forward P/E ratio of 26.07. Renew Holdings recently bought J Browne for £29.5m and this provides greater exposure to the water business. New clients include Thames Water and Southern Water. It appears Renew is putting its earnings to good work.  

I’ve always found Warren Buffett’s techniques useful. I will buy both Pan African Resources and Renew Holdings without delay, acquiring two cheap growth stocks in the process.  

Andrew Woods has no position in any of the shares mentioned. 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.

Since the global financial crisis in 2008, bank stocks have, for the most part, made poor investments. A decade-long low interest rate environment has squeezed their key financial metric — net interest margin (NIM) — to low single-digits. They have also been forced to comply with sweeping regulatory reforms aimed at shoring up the banking system. This has included the capital structure requirements within CET1 as well as the introduction of the bank levy.

The consequences of these financial requirements have effectively prevented banks from handing out a large chunk of their profits to shareholders in the form of dividends. Echoes of the nervousness that still exists in the banking system, were very much in evidence when Covid struck. At that time, the UK regulator ordered the banks to suspend dividends on fears that they could suffer catastrophic impairment losses.

Runaway inflation

With the inflation genie out of the bottle, central banks are now beginning to taper their purchase of financial assets and actively moving to raise interest rates. In response, Barclays, Lloyds and HSBC have all begun putting out positive vibes to investors providing estimates of increased net interest income in their annual results presentations last week.

Recently, a growing number of investors have been rotating out of US equities and into more safe-haven stocks, including banks. The January sell-off on the Nasdaq demonstrates this. But growth stocks have been performing poorly against value stocks for some time now.

However, not all value stocks are equal. The clear beneficiaries of a rising inflationary environment so far have been tangible assets. Glencore, a leading commodities trader, has seen its share price hit a 10-year high. BP and Shell have surged as oil hits $110 a barrel. Bank stocks, however, have only seen small rises.

Lessons from history

One has to go back 50 years to find a comparable macro set-up similar to today. In the early 1970s, we had the nifty fifty (the growth stocks of the day) that reached insane valuations. Set against this, was the backdrop of rising inflation. Then, the oil crisis struck and oil prices went up threefold leading to the bear market of 1973-74. In the ensuing meltdown, when the S&P 500 lost half its value, bank stocks got crushed. The only stocks that did well were precious metals and commodities.

Today, a whole array of growth stocks from the FAANGs, to software companies and unprofitable start-ups have reached valuations totally detached from their underlying fundamentals. We have rising energy and commodity prices due to a chronic underinvestment in the natural resources sector. And we have inflation building in the system.

In such an environment, if the S&P 500 falls anywhere near the amount it did back in 1973, do you think banks would perform well against such a backdrop? I don’t believe they would. They would get caught up in the ensuing sell-off too.

So, does that mean that I am selling my existing holdings in banks? No, because I bought shares in these companies at the pandemic lows and I, therefore, have a good margin of safety. But what it does mean, is that I will not be adding to my positions. Bank stocks are not safe-havens buys for me in the present environment.

Andrew Mackie owns Glencore, Barclays, HSBC Holdings, BP and Shell plc. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Lloyds Banking Group. 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.

The Stocks and Shares ISA deadline is rapidly approaching. The deadline for contributions is 5 April, when the new tax year begins. Investors have up until this point to pay in funds up to their £20,000 allowance. The allowance renews in the new tax year, but it is a use it or lose it allowance. Any unused allowance from the current tax year does not roll over — although that does not mean I have to buy shares straight away. As long as the money is in the account by deadline day, I can take my time stock-picking. 

But I am planning to make as much use of my £20,000 Stocks and Shares ISA allowance as possible in the current tax year. I do not think I am going to be able to pay in the entire allowance, but I do have a figure of £10,000 available to invest in my favourite stocks and shares. 

Picking my top investments

A Stocks and Shares ISA comes with certain tax benefits. Any income or capital gains earned on investments held within one of these wrappers is not liable for tax.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Thanks to this benefit, some investors prefer to hold income stocks rather than growth investments in their ISA portfolios. This is a perfectly acceptable strategy, but as I tend to hold most of my investments inside an ISA, I tend to invest in both income and capital growth opportunities. I do not want to limit myself. 

Considering the current geopolitical and economic environment, I am planning to buy a range of defensive investments for my portfolio. 

Defensive Stocks and Shares ISA holdings 

One such company is the telecommunications group BT. I think this business is relatively insulated from the challenges affecting the global economy and the geopolitical crisis in Eastern Europe. It is investing heavily to build out its fibre broadband network and improve customer service across the country.

While this investment will hold back profits over the next few years, I believe it is the right decision. Rising interest rates could also put profit margins under pressure as BT has an enormous amount of debt. Even after considering these headwinds, I would buy the shares for income and growth in my Stocks and Shares ISA. 

Another pick is the Bankers Investment Trust. This company owns a portfolio of international growth and income shares. It has one of the longest track records of dividend increases in the investment trust space. The group has increased its payout every year for the past 55 years. I think an investment trust like this is the perfect way for me to build a diverse portfolio with a large lump sum at the click of a button.

However, there is a risk that by outsourcing the management of the portfolio, I could end up owning investments I would rather not hold. That is something I will be keeping an eye on going forward. 

Rupert Hargreaves has no position in any of the shares mentioned. 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.

If you want to see a boom and bust, just look at Greatland Gold (LSE: GGP) over the past couple of years. The GGP share price took off in 2020, reaching 38p near the end of the year. Over the course of 2020, GGP shares climbed by 1,900%.

Then in 2021, everything went into reverse, though not all the gains were lost. As I write today, the shares stand at just 13.1p, having fallen 41% over the past 12 months — and 65% since that late 2020 peak. So what went wrong? What could drive the price up again in 2022? And should I add this penny share to my portfolio?

The excitement was all about Greatland’s Havieron exploration project in Western Australia, a joint venture with Newcrest Mining. The partnership has identified what miners dream of, a huge gold and copper deposit. At the time, estimates suggested it could hold around 4 mega-ounces of gold or gold equivalents. At around $1,900 per ounce today, that could be worth $7.6bn, or £5.7bn.

GGP share price fall

To put that into some kind of perspective, Greatland’s market cap currently stands at approximately £530m. But what’s the story behind the subsequent price fall? Well, promising though the potential riches might appear, the project is still very much in its early stages. And the company has only just commenced a feasibility study covering the whole site.

We should have the results of that by December this year. And I wouldn’t be surprised to see the GGP share price meandering until we get close to that revelation. Even then, extraction of the shiny stuff is not expected to start until 2024. And the company doesn’t expect payback until around three years after that.

Greatland reported a loss of £5.5m for the year to 30 June 2021, with no operating income yet. Still, the potential at Havieron meant the company has had no trouble raising new funds. November’s fundraise generated a total of $16m (£11.9m), with new equity issued at 14.5p  per share. 

Uncertainties

How much of the final wealth will end up with existing shareholders is a uncertain though. How much new cash will be needed before any operating profits are seen? And what will shareholder dilution look like by the time that point is reached? These questions will surely weigh on the GGP share price.

There are also uncertainties over what the full survey of the site will reveal. But on that score, I’m reasonably optimistic based on the progress so far. The South-East Crescent of the project looks very good, appearing to hold 1.6 mega-ounces of gold and 73 kilo-tonnes of copper. If that ends up being representative of the whole site, then I could imagine a very profitable future for GGP shareholders.

Will I buy? Well, I was burned by Sirius Minerals — a different mining commodity, but a similar early-phase project. Any entry now would be too speculative for me. So I’ll sit it out, even though I suspect the GGP share price could be stronger by the end of 2022.

Alan Oscroft has no position in any of the shares mentioned. 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.

I’ve been an owner of Coca-Cola HBC (LSE: CCH) shares for several years now. I bought it because of its qualities as a safe-haven stock. The immense brand power of the drinks it bottles, along with its huge geographic footprint, enables profits to remain stable even when social, economic or political crises emerge. CCH’s sinking share price in recent weeks tells a different story, however.

The events of the past couple of years have shown that even solid consumer staples businesses like this aren’t immune to weakness . First the pandemic took a bite out of Coca-Cola HBC’s earnings as out-of-home sales slumped during lockdowns. And now the unfolding tragedy in Ukraine threatens to derail CCH’s post-pandemic recovery.

Still falling

Coca-Cola HBC’s share price has suffered more heavy losses in Wednesday business as shelling in Ukraine has intensified. It’s down 6.2% today at £16.62 and trading around its cheapest for almost two years. On a 12-month basis the stock’s fallen 28% so now it’s trading on a forward price-to-earnings (P/E) ratio of 11.9 times.

Historically CCH’s share price has commanded a much-meatier forward P/E ratio of around 20 times. The risks to the FTSE 100 firm are increasing, sure. And as a human being my concerns over CCH take a back seat to my horror at the worsening conflict. But as a long-term investor, should I consider increasing my holdings given that slumping earnings ratio?

Why exactly has CCH’s share price tanked?

Coca-Cola HBC is considered to have significant growth opportunities because of its broad exposure to emerging markets. The problem right now is that the conflict in Eastern Europe could decimate the recovery in two of its biggest emerging markets.

Collectively Russia and Ukraine account for 16% of all volumes. What’s more, the post-pandemic rebound has been particularly strong in these two nations. Russian volumes rose 18% in 2021 while those in Ukraine jumped 17%. By comparison volume growth across the group averaged 13% last year.

It’s no shock then that investors have headed for the exits in recent days. The impact of economic sanctions on consumer spending in Russia — a country accounting for more than a quarter of all emerging market volumes — threatens to significantly harm CCH’s earnings. The business has also shuttered its Ukrainian bottling plant in recent days.

Here’s what I’m doing today

Last week Coca-Cola HBC chief executive Zoran Bogdanovic tried to soothe investor fears over its Eastern European operations. He told Reuters that “we have contingencies in place for all scenarios” and that the firm has built stockpiles to help it avoid disruption.

Only time will tell if the company has done enough in response to the crisis. But right now things are looking dicey for Coca-Cola HBC and its share price in the short-to-medium term. The question is whether I, as someone who invests for the long haul, should think about buying CCH following its recent share price dip.

I still believe that Coca-Cola HBC has the tools to grow strongly in the future. The brand power of its beverages is unrivalled, while its entry into fast-growing segments like low-calorie and energy drinks is progressing nicely. But right now I’ll hold off buying the FTSE 100 stock until the tragedy in Eastern Europe eases and its future in Russia and Ukraine becomes clearer.

Royston Wild owns Coca-Cola HBC. The Motley Fool UK has recommended Coca-Cola HBC. 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.