It’s no surprise that The Gym Group’s (LSE: GYM) share price has collapsed in recent sessions. The arrival of the omicron coronavirus variant on these shores has fed fears that mass lockdowns of Britain’s leisure sector could return.
The Gym Group itself has slumped to its cheapest since early February, at around 235p per share. The company’s high valuation even in spite of recent drops leaves it in danger of additional weakness too. Today the UK share trades on a forward price-to-earnings (P/E) ratio of above 60 times.
In great shape to jump again?
The risks of gym shutterings are something investors need to consider seriously, even if studies into omicron are in their early days. But could The Gym Group be an attractive dip buy at current prices for my long-term portfolio? Attendance at gyms and fitness centres has been especially strong since Covid-19 lockdowns were first eased in the spring.
The Gym Group itself added 183,000 new members in the four months to 30 June, latest trading numbers showed. This took the total to 730,000. A quest for better personal health and an improved physique has driven gym attendance through the roof in recent years. It’s a long-term trend that I’d expect to resume in the event of fresh lockdowns.
The ongoing Covid-19 crisis poses a significant threat to profits in the immediate future. But the rate at which the gym industry is growing means The Gym Group could still prove to a brilliant buy for the years ahead. I’m encouraged by a recent £30m-plus share placing, too, that has bulked up its balance sheet and left it better prepared for fresh centre closures. I think recent heavy share price weakness could prove an attractive point for me to buy this cheap UK share at.
A fallen penny stock I’m considering buying
Recent share price falls leave Titon Holdings (LSE: TON) trading just inside penny stock territory at 99.5p per share. It has lost 20% of its value over the past three months as concerns over the economic recovery have grown. The departure of recently installed chief executive Mat Norris “to take up another role” earlier in November hasn’t helped investor confidence, either.
Could this provide me with a great dip opportunity, however? Titon manufactures ventilation systems as well as door and window fittings that it sells in Europe, North America, and South Korea. It is therefore well placed to ride the housebuilding boom to meet the needs of a growing global population.
It’s true that conditions are weak in its Asian marketplace. However, I think the strength of the UK, US, and European housing markets still make it an attractive stock for me to buy. Revenues at Triton rose 4.1% year-on-year during the six months to March 2021, latest financials showed, as housebuilding levels recovered. I’m expecting another sunny update when full-year trading numbers are released, one that could help Titon’s share price power back above £1.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended The Gym 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.
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