Due to current economic volatility, some UK shares, including On The Beach (LSE:OTB), are falling. I remember being able to book holidays and travel easily pre-pandemic. For a couple of years, it became difficult due to restrictions and new rules. I sense some normality coming back. Should I buy shares with a view to a longer-term recovery?
Holiday retailer
On The Beach is an online retailer providing consumers with beach holiday packages. It acts as a gateway where customers can reach out to suppliers of accommodation and airline tickets through its multiple brands, via online and telephone channels.
So what’s happening with On The Beach shares currently? Well, as I write, they’re trading for 106p. At this time last year, the stock was trading for 358p. This is a 70% drop over a 12-month period.
UK shares have risks
I believe On The Beach shares will come under further pressure in the coming months due to current macroeconomic headwinds. Soaring inflation has created economic volatility including rising prices for a lot of commodities, including essentials such as food and energy. As a by-product, a cost-of-living crisis has emerged in the UK.
With this in mind, I believe On The Beach could suffer a drop-off in sales as people will choose not to book holidays. Instead, they will be focusing on paying for essentials such as food, and trying to heat their homes.
Why I like On The Beach and what I’m doing now
Let’s take a look at some bullish aspects of On The Beach. Firstly, after a couple of tough years due to the pandemic when it reported losses, it has seen demand increase past pre-Covid levels. This has, in turn, strengthened its balance sheet with some impressive results recently. Its interim report, released in May for the six months ended 31 March, made for good reading. Revenue increased by £12m compared to the same period last year, to £52.9m. Losses narrowed from £21.6m to just £7m. Finally, it managed to record a net cash figure of £14.6m and reduce debt to just £3.65m. This all tells me it has enough liquidity to deal with potential stormy waters ahead.
I try to adopt a buy-and-hold approach, similar to the teachings of investing guru Warren Buffett. He once said, “Our favourite holding period is forever”. I believe the current volatility and falling share price is an opportunity to buy shares in a company I believe will recover in the longer term. My stance comes from the fact there is a newfound appreciation for travelling after the pandemic.
Finally, On The Beach shares look decent value for money after the recent share price fall. They currently trade on a trailing 12-month price-to-earnings ratio of just seven.
Overall, I like the look of On The Beach shares. It is one of a number of falling UK shares that have caught my eye in recent months. I will place it on my buy list for the next time I have some funds to invest to boost my holdings.