Britain’s multinational public transport company National Express (LSE:NEX) has been another struggler during the coronavirus pandemic. But the National Express share price has risen 10% in a month and things appear to be looking up.
Opportunity for value hunters
The FTSE 250 group carried out an equity placing in May, diluting existing shareholders by slightly less than 20%. This gave the company a welcome liquidity boost. Since then, an earnings update has shown the company to be in better shape than previously anticipated.
Year-to-date, the National Express share price is down 47% from a level it had previously enjoyed for several years. This makes me think it is undervalued at today’s prices and this is a stock worth buying for the long-term.
National Express has a market value of over £1.5bn. Its price-to-earnings ratio is 9, earnings per share are 27p, and its debt ratio stands at 57%.
Despite revenue declining 50% in April, earnings and cash flow beat expectations. Earnings before interest, tax, depreciation, and amortisation (EBITDA), was up, slightly ahead of board expectations and pleasantly surprising investors. This was because the company reduced monthly operating costs by approximately £100m and drew support from loyal customers and government subsidies. It has around £1.5bn in cash and accessible credit facilities.
National Express is following UK government guidance and has resumed the sale of UK coach tickets for journeys beginning in July. Meanwhile, in America, it won a five-year school bus contract. Throughout the rest of the world, it is resuming service in many countries as lockdowns are lifted.
For the investor with a long-term outlook, I think the National Express share price would make a good addition to a Stocks and Shares ISA. It also appears to be less risky than investing in oil stocks or pharmaceuticals.
From coaches to cars
Another FTSE 250 stock that has been garnering a lot of interest in recent weeks is Aston Martin Lagonda Global Holdings (LSE:AML), the manufacturer of luxury sports cars.
The Aston Martin share price is up 67% in the past month, but it remains 92% down on the year. It has pulled guidance for the year after widening losses and a bleak future outlook have put the brakes on wholesale volumes.
A disastrous £119m loss in the first quarter of 2020, led the board to request CEO Andy Palmer stand down. Mercedes-AMG boss Tobias Moers will be his replacement. Earlier this week, the group confirmed it is axing 500 jobs to cut costs in light of a major slump in sales.
However, it is apparent Aston Martin was in trouble long before the pandemic hit, as the US-China trade war took its toll back in July last year. This reduced orders from wealthy Chinese customers. It is now focusing on manufacturing its DBX sports utility vehicle, which still has a stable order book.
All these cost-cutting measures are in place to reduce expenditure and restore profitability. These are positive moves that shareholders and potential investors like to see, but I think external factors remain a concern. A solution to the pandemic has not yet arisen, and the US-China trade war could rage on for many years. Luxury consumer goods will be low on the purchase list if the world slips into an extended recession. Unfortunately, I think the Aston Martin share price remains too risky.