The stock market crash back in March is still creating opportunities for investors looking for a bargain. I think these FTSE 350 shares all have huge recovery potential as the prices have fallen heavily.
The cheap travel stock
National Express (LSE: NEX) shares are down over 60% so far this year. Like other travel-focused shares, it’s been understandably hit hard by the lockdown. The shares had been steadily rising though for years before the coronavirus outbreak.
National Express was able to update back in May that even though revenue halved in April its earnings and cash flow were better than expected. Services are also opening up across the UK, US, Spain, and Morocco this month.
With operating profits increasing from £197.9m to £242.3m between 2017 and 2019, I think it’s a hugely profitable company. Revenues also increased by 18% over the same time period.
My main concern is that the group does carry about £1.2bn of net debt at the time of its last annual report. Also the biggest division is school buses in North America so much of the recovery will be dependent on schools reopening there.
On a price-to-earnings of only five I think the shares could well be too cheap to ignore.
The builder with huge recovery potential
Crest Nicholson (LSE: CRST) are, based on the P/E ratio, just as cheap as those of National Express. Like other housebuilders, it seems to be suffering from a lack of investor enthusiasm for the industry as a whole. This is likely because investors anticipate Brexit negotiations and the end of Help to Buy in coming years might hamper demand.
More recently, the coronavirus has obviously had an effect as well, pushing the cheap share price pre-virus even lower.
The group no longer pays a dividend. It also said it now expects FY2020 adjusted profit before tax to be in the range of £35m to £45m, which is well below 2019’s profit of £121.1m. Its debt is also now a bit of a worry and is worth keeping an eye on.
For all this though I think the share has the potential to recover. Housebuilders were allowed to reopen much earlier other than many other industries. They benefit from the UK’s continuing imbalance between supply and demand for housing.
The FTSE 100 dividend cutter
Royal Dutch Shell (LSE: RDSB) has been hammered because the company took the step of cutting its dividend. Along with worries over the oil price and fears about the global economy there’s been a bit of a perfect storm brewing over the share price.
Add to the mix comment from rival BP’s CEO saying now could be “peak oil” and it’s little wonder investor confidence in Shell isn’t so high.
Yet for all this in the short-term, given how cheap the shares are I think there’s the opportunity for a huge recovery. Confidence fluctuates and Shell has come through similar periods before. Longer term, it also has opportunities in clean energy and petrochemicals so its days are far from over in my view.