Image source: Getty Images
Trainer and sportswear specialist. JD Sports Fashion (LSE: JD) has been my favorite FTSE 100 growth rate over the years. So I got to work after the January profit warning that was triggered by a bad Christmas trading period.
I've had a bumpy road since then, but I felt vindicated when the stock took off in September and I suddenly found myself up 30%.
However, the last month has been difficult, with the JD Sports share price falling 14.56% in that time, halving my paper profits.
But there is no way it will sell. I buy stocks with a minimum five-year view and would love to hold this one for decades. Instead, I wonder if I have a second chance to buy more.
The price has fallen
There is a shadow hanging over JD stock and it is shaped like a swoosh. Key Trainer Provider Shares Nikea major JD partner, hit its lowest level in four years in the summer as sales fell.
Falling demand from China, competition from cheap rivals like Hoka and the decision to sell directly to consumers and eliminate some third-party retailers were all to blame. When Nike withdrew its full-year financial outlook and lowered second-quarter earnings expectations on Oct. 1, JD Sports also took a hit.
This was despite JD publishing a positive set of half-year results the following day, which showed half-year profits rose 2% to £405.6m. It was better than expected, given the current situation. “challenging and volatile market”.
Bury-based JD has its own problems as attacks on Red Sea shipping by Houthi rebels hit deliveries, while a wet spring reduced demand for camps in its Millets and Blacks chains.
The figures only include a 10-day contribution from US acquisition Hibbett, but it now accounts for 40% of group revenue and should contribute £25m to full-year profits. JD is planning a major expansion into the US market, with 700 new stores planned within four years.
Stores continue to offer deep discounts to attract customers as the cost of living crisis drags on. Nike is still a problem. At least JD has adidas although. While Nike's share price is down 20% in a year, Adidas is up 30%.
This FTSE 100 stock looks like great value
In the long run, Nike's misstep could help JD Sports. I've always worried that big-name brands will decide to bypass JD and go their own way, but as Nike has shown, this opens up space for cheaper or more fashionable rivals.
JD Sports shares are up a modest 4.56% in 12 months, but down 38.06% in three years. I still think there is a great opportunity here.
The stock appears to be good value for money with a P/E ratio of 10.9. The price-to-sales ratio is just 0.6, suggesting investors are paying just 60p for every £1 of income.
The 13 analysts offering one-year share price forecasts have an average target of 174.15p. That's more than 30% more than today. This confirms my view that this is a brilliant opportunity to take advantage of my favorite growth stock, so that's what I'll do.
