Key points

• Revenue and profit, among other metrics, indicate consistent business growth
• The company is taking steps to address recent issues
• Using the price-to-earnings ratio, Boohoo stock is cheap 

Shareholders in Boohoo group (LSE: BOO) have become increasingly frustrated with the last year’s share price action. From February 2021 until now, the Boohoo share price has fallen over 75%. This is a major collapse. With encouraging fundamentals and other positive news, however, I think now could be a good buying opportunity. What’s more, this stock is cheap. Should I add this firm to my portfolio? Let’s take a closer look.

Solid fundamentals

The Boohoo share price is underpinned by solid and consistent fundamentals. For the year ending February, revenue has increased from £294m in 2017 to £1.7bn in 2021. This represents nearly six-fold growth.

Furthermore, profit before tax has followed a similar trend. In 2017, this figure was a mere £30.95m. By 2021, however, this had grown to £124.7m. As a potential shareholder, this gives me confidence that the business is going in the right direction. I hope that this growth will soon be reflected in the Boohoo share price (but not before I buy!)  

In addition, earnings-per-share (EPS) have increased over the same period from 2.23p to 8.89p. Using the compound growth formula, that calculates constant movement on an annualised basis, EPS has risen 31.9% annually.

On the flip side, Barclays recently downgraded the firm on account of “a laundry list of headwinds”. These include supply chain issues and high returns rates. I view these as fundamentally short term in nature and expect them to subside soon. In particular, the business has taken measures to address labour abuse allegations by building its first factory to manufacture clothing and teach good practice.   

Why the Boohoo share price is a bargain

A good metric for assessing the cheapness of shares is the price-to-earnings (P/E) ratio. The Boohoo P/E ratio is currently 12.26. ASOS, its nearest comparable retailer in UK online fashion, has a P/E ratio of 15.81. This tells me that while Boohoo may be a riskier investment, it is also much cheaper than competitors and the online retail sector as a whole.

That being the case, it is possible that the share price may soon increase on account of constant sales growth (sales rose 10% for the three months to the end of November 2021). This is compounded by the impressive fundamentals the company has displayed over the past five years.

This firm has not been without its troubles of late. What is heartening, however, is to see management tackle these issues head on. I see the fundamentals as extremely attractive and the share price as cheap. So I will be buying shares in this exciting growth stock as soon as possible. 

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Barclays, and boohoo 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.

Key points

• One FTSE 100 copper mining company has quadrupled its profits in the past five fiscal years
• Silver is central for many efforts to find greener energy solutions
• Both companies covered here could be pivotal for my long-term portfolio growth 

The FTSE 100 is full of exciting companies that are appropriate for my long-term portfolio. Recently, I’ve found two mining stocks that may be very important as the world seeks greener solutions. While I already own shares in Fresnillo (LSE: FRES), the Mexico-based silver miner, I want to know if I should buy more. Also, the copper miner Antofagasta (LSE: ANTO), from Chile, is appealing to me because of its excellent fundamentals. 

The FTSE 100 copper mining growth stock

Antofagasta operates two divisions: copper mining and transportation. For the fiscal years 2016 to 2020, the firm’s fundamental data demonstrate solid and consistent growth. During this time, revenue increased from $3.6bn to $5.1bn.

Furthermore, profit before tax more than quadrupled to $1.4bn. This profitability is especially appealing to me, a potential investor. Unsurprisingly, earnings-per-share (EPS) have risen at a compound annual growth rate of 9.5%. This means that this FTSE 100 company is delivering for its shareholders year in, year out.

What’s more, the business is potentially a bargain. With a price-to-earnings (P/E) ratio of 36, Antofagasta is undervalued compared to the mining sector. The sector’s average P/E ratio is 48. With the importance of copper for future green solutions like electric vehicles, I think it’s a good time for me to buy.

While a recent drought in Chile has caused some concern about the FTSE 100 company’s ability to mine copper, I see this as a short-term issue. Furthermore, the firm beat cost objectives and hit production targets in a recent report for the three months to 31 December 2021.

A silver miner that just might take off

Fresnillo mines silver in Mexico and has mixed fundamental data. For the five calendar years from 2016 to 2020, revenue increased from $1.9bn to $2.4bn. While this is encouraging, profits have been sliding and so have EPS. 

The FTSE 100 business also recently issued a production warning over Covid-19 and new labour laws, both of which have resulted in higher worker absences. The market reacted badly, with the share price falling over 20% in response.

In spite of all this, I remain optimistic. The production warning was based on issues that are fundamentally short-term in nature. In time, they will subside. Like copper, silver is also central to many decarbonising efforts around the world, not least in solar panels. 

While neither of these companies is without its problems, I think demand for copper and silver will continue to grow. Antofagasta is underpinned by solid growth and I expect this to remain. Furthermore, if Fresnillo can remedy its short-term issues, I think it can drive production higher. I will be buying more Fresnillo stock and purchasing Antofagasta shares in anticipation of long-term growth for my portfolio.

Andrew Woods owns shares in Fresnillo. The Motley Fool UK has recommended Fresnillo. 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’m always on the hunt for dividend stocks with attractive yields. Given that the calculation of the dividend yield involves just the dividend per share and the share price, I can think smart in this regard. If the dividend per share has remained the same, but the share price has fallen, the dividend yield will have increased. With that in mind, here are two stocks trading close to 52-week lows that I think could be worth me buying.

Building homes and dividends

The first business I’m thinking of buying shares in is Persimmon (LSE:PSN). The UK-based homebuilder current has a share price of 2,445p. It hit 52-week lows a couple of weeks ago when it traded down to 2,321p. Even with the small bounce, the share price is down 10% over the past year.

In terms of dividends, it currently has a yield of 9.6%. This makes it one of the highest-yielding stocks in the entire FTSE 100. The recent move to fresh lows has helped to boost the yield, particularly over the past few months.

One of the main reasons for the recent fall has been concern over cladding remediation. It’s a complex issue as to who should foot the bill when it comes to replacing and renovating properties to bring them up to standard. If most of this falls on the builders such as Persimmon, it would take a hefty chunk out of profits.

Aside from this risk, I see reasons that are positive to consider buying shares in this dividend stock. The trading statement released a month ago showed good growth in new home completions. In 2021 the figure was 14,551, up from 13,575 in 2020. This helped to increase new housing revenue to £3.45bn, from £3.13bn the year prior.

The top dividend stock in the FTSE 100

The other dividend stock trading close to lows is Evraz (LSE:EVR). It made 52-week lows last week, hitting 410p. Over one year the share price is down 12.4%, but it has taken a hit of almost 30% in the past three months. Again, this is one reason why the dividend yield has popped considerably higher recently. It currently has the highest dividend yield in the FTSE 100 at just above 20%.

This seems a staggering yield, with warning sirens going off in my head. To be clear, this is a high-risk stock, so I’m only considering investing a small amount.

The main risk is its ties with Russia. The steel and mining company has operations in the country, along with other countries in eastern Europe. Given the situation with Russia and Ukraine, it’s clear why some investors want to stay well away from this dividend stock. Evraz also pays the dividend in US dollars, so there’s foreign exchange risk for a UK-based investor like myself.

Even with that being the case, a 20% yield is still hard to turn down. Evraz is performing ok, with 2021 production figures showing a decrease in steel but an increase in coking coal. It’s a mixed bag, but it has a clear dividend policy, so as long as overall figures hold up I don’t see why the company won’t continue to pay out income.

Jon Smith and The Motley Fool UK have 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.

For a while now, it’s seemed like nothing could stop Tesla (NASDAQ: TSLA) shares from rising. It’s pretty much been a stock market darling since it listed via an initial public offering (IPO) back in 2010. Even today, it’s still widely held by large institutional investors, including Cathie Wood at Ark Invest.

But just how much would I have earned if I was lucky enough to have bought the shares at the IPO? And most importantly, should I buy today?

Buying Tesla shares at the IPO

Tesla became a public company on 29 June 2010 at a share price of $17. However, due to Tesla’s stock split, the split-adjusted IPO share price is $3.40. Fast-forward to now, and the stock price is a much bigger $860. This results in a huge return of 25,200%!

I’m a UK-based investor though, with a sterling-valued portfolio. So, taking into account the currency impact, my £1,000 investment in Tesla shares at IPO would be worth an incredible £280,651 today!

Now, it would have been very unlikely that I’d have bought the shares at IPO. Not to mention having to hold the stock for 12 years. The share price has been very volatile over this period, which would have made holding them a tough call when they fell in price.

Nevertheless, I could have bought and held Tesla shares soon after the IPO and the returns would have still been mega. But the important question now is: should I buy the shares today?

The investment case

I think the electric vehicle (EV) market is an exciting area for investors. There’s no doubt in my mind that demand for EVs will soar in the years ahead. Tesla should be able to capitalise on this significant sector tailwind, in my view.

The company’s fundamentals have been improving too. Indeed, Tesla was profitable in the previous two years.

Revenue grew by a huge 71% in the full year through 2021, and it’s expected to grow again in 2022 by an impressive 52%. This should translate into profit before tax growth of 165%. I can understand any investor getting excited about growth rates as high as these.

Demand for Tesla’s EVs shows no signs of reducing either. The company upped its deliveries of vehicles in 2021 to 936,172, an increase of 87% over 2020.

Should I buy Tesla shares?

Although Tesla shares have produced incredible returns so far, I think the company benefited hugely from first-mover advantage. It almost took the big incumbent automakers by surprise in just how popular EVs have been. However, I don’t see this first-mover advantage today. Companies such as Ford and others are investing heavily in their own EVs, so competition should intensify from here.

My lasting issue with Tesla shares has been the valuation. The company topped over $1trn in market value recently, although it has since fallen to $889bn. However, on a forward price-to-earnings basis, the shares still trade on a multiple of 87. The growth rate will have to remain very high to warrant this valuation.

So today, due to increasing competition and a valuation that leaves no room for error, I won’t be buying Tesla shares. I do wish I’d bought at the IPO though!

Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.

Over the past 10 years, Premier Foods (LSE: PFD) has transformed itself from a struggling penny stock into an FTSE 250 growth star. 

Now the enterprise is entering a new stage of its life. The recovery is complete, and management is looking forward, focusing on the company’s growth potential over the next few years. 

As the firm embarks on this next stage in its journey, I would buy £2k worth of shares for my portfolio. 

FTSE 250 growth prospects 

Premier was one of the country’s biggest food businesses in the mid-2000s. Unfortunately, the organisation crumbled in the financial crisis as its highly-leveraged balance sheet became impossible to manage.

In the decade following the crisis, the firm focused on reducing debt, selling off businesses, and managing its vast and complex pension schemes. 

The transformation was making solid progress, and then the pandemic arrived. Unlike many other businesses, Premier had a great pandemic. The home cooking trend pushed the demand for its foodstuffs through the roof. For the fiscal year ending May 2021, the firm reported a near-12% increase in revenues. 

This growth generated a profit windfall for the group. Management used these funds to accelerate the firm’s recovery plan, further reducing debt and getting to grips with the pension obligations. 

As the firm has shaken off the shackles of debt, it has been able to plough more money back into the business. Over the past five years, its annual interest obligations have fallen from £46m to £30m. To put this £16m decline into perspective, the business generated a net profit of just £8m in its 2018 financial year. 

According to the company’s latest trading update, it forecasts a trading profit of £125m for the current year. Debt is expected to fall further, and more money is being invested back into growth. 

Shedding the penny stock label 

A particular area of growth for management is its international business arm. International sales are up 33% compared to 2019 levels, and the FTSE 250 firm wants to boost growth further.

Investing abroad seems like a great idea, but it also comes with risks. The international food and drinks market is incredibly competitive.

There is no guarantee the firm will achieve a return on its investment. This could end up becoming a money pit for the business. Premier came close to collapse in the financial crisis after trying to expand too far, too fast. There is no guarantee this will not happen again. 

Despite this risk, I am excited about the company’s potential. The business has already grown out of its penny stock label, and the shares could rise further in the years ahead.

Even though the stock has added 30% over the past year, the shares are still selling at a relatively undemanding forward price-to-earnings (P/E) ratio of 10.2. Many of its peers command mid-teens P/E multiples. 

Considering this valuation and the group’s growth potential in the years ahead, I would be happy to invest £2k of my hard-earning money in this business today.

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.

It’s been a great start to the year for the BP (LSE: BP) share price. It’s surged 26% as I write today. It’s up an even bigger 62% over one year, so things must be looking good for the company. In fact, it’s now the seventh largest member of the large-cap FTSE 100 index.

I’m going to see if I’ve missed the boat on this one, or whether I should still buy the shares today.

A big set of results

BP released its final results for full-year 2021 last week. And they were bumper. The company swung from heavy losses in 2020 to a profit of $7.6bn in 2021. Operating cash flow almost doubled too. This gives the company ample room to invest in capital projects, and pay shareholders a dividend.

On this point, the CEO said: “We’re delivering distributions to shareholders with $4.15bn of buybacks announced and the dividend increased.” This is a good sign, and should mean earnings per share growth and increased income for my portfolio.

It’s easy to see why the results were impressive for 2021. The pandemic heavily disrupted the oil and gas industry so production volumes declined. But demand for the fuels has bounced back strongly, and quicker than the rebound in oil and gas production. This imbalance has meant the prices of these commodities have skyrocketed, which has boosted the profits of companies like BP.

Risks to consider

The main issue I see with BP shares is the inherent cyclicality of the business. Profits are great when commodity prices rise, but crash just as quickly when oil and gas prices fall. It makes it difficult for me to invest as a long-term investor.

The oil and gas sector is also in structural decline, in my view. Fossil fuels are very unsustainable, and there’s a big global effort to transition to renewable energy sources. BP has to pivot its business significantly if it’s to survive in the long run.

Should I buy at this share price?

However, in the short term, there’s no denying that the world still heavily depends on oil as an energy source. Therefore, I don’t see BP’s profits drying up any time soon. There’s also still too little production to satisfy demand for oil today. Indeed, some analysts are forecasting that the price of a barrel of oil will reach $100. If this happens, then I can see the BP share price rallying further.

But I’m assessing the investment as a long-term decision. BP has a long way to go in its transition to a low-carbon business. This will come with significant risk as it shifts away from oil and gas, to renewable energy sources.

So for now, I won’t be buying BP shares, even though the share price could rise over the short term, along with the oil price.

Dan Appleby 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.

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The International Consolidated Airlines Group (LSE:IAG) share price was one of the top performers in the FTSE 100 last week. By moving over 10% higher to close the week at 173p, it eclipsed all others bar Informa. There was a key short-term driver that helped push the IAG share price up, but personally I think that there are reasons to see long-term gains.

Easing restrictions helps to boost flying hours

The easing of further travel restrictions in the UK was the main push behind the rally in the IAG share price last week. News that fully vaccinated travelers will no longer need to take any form of test before or after arriving in the UK will certainly help boost international travel demand. This comes after measures were already slightly relaxed last month. It shows that there’s a clear path that the Government is taking to make it easier for travellers to come to or return to the UK.

For IAG, this is undoubtedly good news. Take one of the operators within the group — British Airways. Based at Heathrow, the airline caters mostly for long-haul flights into Europe and beyond. Being able to service customers who now feel comfortable travelling based on the latest rules should aid revenue.

In fact, online travel agency Skyscanner said that bookings for return travel from the UK this summer was up 394% in January compared to December. 

The 10% jump in the IAG share price comes as investors price in the good news and IAG sees the expected increase in sales since the news broke. 

Potential for the IAG share price to keep going

Personally, I think that there’s more to come. The IAG share price is still down 58% over a two-year period, taking in almost the full period of the pandemic. I’m not saying that all of this ground can be made up in the matter of a few months. But I do think it highlights that there’s still a lot of room for the shares to move higher before IAG hints at being overvalued.

In just a couple of weeks, full-year results for IAG will be released. This will include commentary from the management team on the outlook for 2022. I think that this will be key in determining the direction for the share price in the short term.

The latest results I have access to are for the nine months through to the end of September. These weren’t fantastic, but did provide enough positives to keep me optimistic for this year. For example, passenger capacity for Q3 was 43.4% of 2019, up from 21.9% in Q2. The finances also showed good liquidity of €10.6bn. This should help cash flow until revenue really starts to pick up again.

In terms of risk, the IAG share price is still very much at the mercy of the virus. Even though the UK is lifting restrictions, customers still might be concerned about Covid-19 levels and restrictions at their destinations. IAG also has been bleeding money since 2020, and so the net debt pile of over €12bn is also of concern.

But I’m positive overall and considering buying the shares after the full-year results are released.

Jon Smith and The Motley Fool UK have 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.

On Wednesday, the January figures for inflation are due out in the UK. The previous figure from December was 5.4%, and the average expectation for this month is also 5.4%. On the one hand I might breathe a sigh of relief that the number isn’t expected to hit 6%. Yet at the same time, it’s clear that inflation isn’t falling to the target rate of 2% any time soon either. With that in mind, here’s how I’m trying to use top UK stocks to offset this erosion from inflation.

Picking up dividend payments

Firstly, I’m looking at dividend stocks that offer me a yield in excess of the current level of inflation. The average FTSE 100 dividend yield is 3.2% today, so it’s clear that I need to be going for the top UK dividend stocks here. Thankfully, there are many companies that I think could make smart investments for me.

For example, I could go for established names such as British American Tobacco and Rio Tinto. Both have a dividend yield above 6%. Further, both stocks have a long history of paying out dividends. Although I can’t guarantee that this will continue in the future, it does give me a good indication of the reputation of these dividend payers.

In theory, if I buy the stocks now and the dividend per share doesn’t change, the income I receive from the dividends will offset the impact of inflation. The risk with this method is that higher inflation can cause costs to rise for a business. This might mean it has to lower the dividend due to waning profitability.

Buying undervalued gems

The second way I’m thinking about using stocks is via undervalued picks. I could refer to these as ‘secret’ UK stocks. One way I can filter for this is by screening for low price-to-earnings ratios. As a tool, the lower the value usually indicates that a company is undervalued.

For example, both Royal Mail and JD Sports Fashion have current P/E ratios just above 7. This is around half the FTSE 100 average P/E. My thinking here is that if I buy these stocks now and over the course of the next year or more they return to a fairer value, the share price movement could eclipse 5.4%. So from the unrealised gains from my capital, I can help to offset inflation.

The risk with this idea is that the companies stay undervalued for a longer period of time than I was expecting. It could take years for the market to correct. Further, I might have made the wrong call, with investors not putting their money in these stocks for valid reasons that I’ve simply not appreciated.

Making use of top UK stocks

I need to think outside of the box if I want to generate a positive net return in 2022. Picking average or underperforming FTSE 100 stocks is only going to add to the drag from high inflation. Although I can’t guarantee returns, by using top UK stocks that have generous dividends or a low valuation I can give myself a better chance of coming out ahead.

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended British American Tobacco. 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.