Image source: Getty Images
Finding the best investments in the FTSE 100 Index A combination of good value and stellar growth is often required. In my opinion, JD Sportswear (LSE:JD) offers both in abundance. Here’s why I think it could offer stellar returns in 2025. But should I buy?
Bargain prices for exceptional growth
I almost bought the stock in early September when it was 15.5% cheaper than today. At the time, I realised that the market had significantly undervalued the company. I thought it could generate 35% growth in market capitalisation in 18 months.
While there is a slightly smaller value opportunity at the moment than there was at the start of the month, I believe the investment remains well positioned for the best long-term returns. It still has a bargain price-to-earnings (P/E) ratio of just 14.5. This is much lower than its 10-year median of 23.
However, the company's growth is slowing, which largely explains why the market has valued it cheaper at the moment.
While I can expect good growth going forward due to its solid international expansion strategy (especially in North America), I cannot expect the same stellar 744% price growth that the stock has generated over the past 10 years over the next decade.
Analysts are optimistic
I am more optimistic than analysts on this one, but 14 analysts have an average 12-month price target of 10.3% growth.
In my view, the investment could generate higher returns than this because it is potentially undervalued. If its P/E ratio rises by 5% over the next 12 months and meets the consensus earnings per share estimate of £0.14 for January 2026, the stock could be worth £2.14 at the end of 2025. That is if the market includes future earnings in the company's valuation early.
But I'm not the one most There is one bull. The highest 12-month target price for JD Sports shares out of the 14 bankers I studied is currently £2.50.
Focusing on the long term
While a 40% return from the current price of £1.52 sounds attractive, it is not enough to earn the company a place in my portfolio. Instead, I need to know that this company has a high probability of continuing to grow over the long term.
Analysts expect average annual earnings per share growth over the next three years of 16%. Management has managed to meet these estimates through a lean operating strategy in which it has sold non-core businesses to focus on its best-performing assets.
However, since the company has such a significant investment in Western markets, it is very vulnerable to a potential recession in this region, which I believe could happen soon. With high inflation and massive federal debt piling up in the US, I am making sure not to own too many Western-focused companies at the moment.
Is a small allowance worth it?
So should I buy JD Sports? To get great returns from the portfolio, it is necessary to diversify well. I only need to have stakes in about 10 stellar companies. However, it is essential to make sure that they vary across different regions and industries around the world. This helps protect me from the unique risks of different markets.
I'm still thinking about buying this stock, but I haven't made a decision yet. I don't want to make the mistake of waiting too long – the undervaluation is unlikely to last much longer!
