FTSE 100 stocks have been on fire so far this year. The UK’s flagship index is up just shy of double-digits, including dividends. And while there’s been a bit of pullback in recent weeks, it continues to trade close to its 52-week high.
Even the Bank of England’s taken notice, warning that investors may not be adequately factoring in risk that may lead to a sharp correction. Yet, despite how things appear overall, there are still plenty of FTSE 100 companies seemingly getting left behind.
In some cases, a falling share price may be justified. In others, a buying opportunity may have emerged. And in the case of B&M European Value Retail (LSE:BME), I think it might be the latter!
Earnings up, share price down
Last month, the discount retailer published its full-year results for its 2024 fiscal year, which ended in March. And looking through the figures, there was a lot to like.
In France, revenue growth came in at a solid 19.2%, while underlying operating margins increased from 8.8% to 9.5%. The firm’s Heron Food brand also achieved double-digit growth with expanding margins. And looking at its UK B&M stores, sales growth doubled, while also delivering wider profit margins.
Combined, the business expanded its operating profits by 10.9% to £629m year-on-year. In turn, balance sheet leverage fell, dividends received a slight bump, and store openings remained on track.
Needless to say, that’s all good news. This leads to a bit of confusion when looking at the share price since it subsequently tumbled by 20% in the following few weeks. What happened?
This sell-off wasn’t triggered by what was in the results. But rather, what wasn’t. The first quarter of its 2025 fiscal year’s up against some tough comparables. And with management providing zero insight into what investors should expect, it seems many have assumed the worst, causing the FTSE 100 stock to suffer a significant drop in valuation. But the results are now out. So are things as bad as everyone thought?
Tough comparables hamper growth
As expected, the three months leading to the end of June were quite tough for B&M. Subsequently, revenue expansion across all three of its divisions saw a significant slowdown. France seems to be the best performer but it only achieved a 7.5% bump. And B&M UK came in last, delivering just 1.5%.
As for operating profits, it’s still a mystery since management hasn’t provided any insight. But assuming margins remained intact, it’s fair to assume that earnings have seen a similar slowdown. With that in mind, the earlier concerns from shareholders appear to have been justified.
However, it’s also worth pointing out that tough comparisons are ultimately a short-term constraint. B&M is still busy expanding its store count, adding 19 locations to its portfolio with another 26 planned throughout the rest of the year. Meanwhile, the group’s just launched its new Everyday Value range, adding 500 new product lines to stores across its territories.
Management appears focused on the long term. And now that most of the uncertainty has been eliminated, today’s cheap share price looks like a buying opportunity, in my eyes. That’s why I’m planning on adding this business to my portfolio once I’ve more capital at hand.
This post was originally published on Motley Fool
