Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Will This Ultra-Cheap Stock Rebound Strongly Soon?

Stock MarketsDec 03, 2021 19:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Will This Ultra-Cheap Stock Rebound Strongly Soon?

The pandemic has impacted some companies far more than others. Tech stocks surged last year while the rest of the economy has been recovering this year. One stock that seems to have missed out is apparel retailer Roots (TSX:ROOT).

Roots stock had a mild recovery but has dipped in the second half of the year. The stock has lost 25% of its value since hitting a two-year high of $4.13 at the end of June. Despite this dip, it’s up 20% year to date, which is in line with the rest of the stock market.

Why is this retailer being overlooked, and could its recovery in 2022 be stronger than its peers? Here’s a closer look.

Waning sentiments Roots stock has come under pressure ever since the provider of apparel, leather goods, footwear, and accessories delivered disappointing second-quarter results for the period ending in July. Net loss in the quarter landed at $1.2 million. Net sales, meanwhile, improved only slightly to $38.9 million from $38.2 million delivered the same quarter last year.

The retailer has been one of the hardest hit amid the pandemic. During the second quarter, 60% of its store remained closed compared to just 45% the same quarter last year.

Roots worsening sentiments in the market stem from the fact that it has underperformed compared to other apparel retailers that have bounced back on focusing on e-commerce. However, the company is looking to change its fortunes by focusing on product innovations and marketing partnerships. Increased focus on e-commerce is also likely to bolster the company’s prospects.

With the easing of the COVID-19 restrictions, the company could post solid results for its third quarter, with results due on December 14, 2021. Meanwhile, the stock price reflects a deeply pessimistic outlook for the company.

Valuation Roots stock currently trades at just $2.95. That’s significantly lower than its all-time high of $13.5 set in 2018. Much of this decline is because of the pandemic and the company’s lacklustre e-commerce performance.

However, it could be argued that Roots is underpriced despite these weaknesses. The stock trades at a price-to-earnings ratio of just 7.6. If the new variant of the virus isn’t as concerning as some expect or if Roots can sustain some growth in its e-commerce segment, this valuation could quickly change.

The reopening is perhaps the biggest catalyst. If Roots can raise the shutters on most of its 68 outlets in time for the Christmas shopping season, shareholders could be in for a windfall. Keep an eye on this high-risk, high-reward retail play for the months ahead.

Bottom line Roots has been battered worse than most other retail stocks. The company lost most of its market value since 2018 and roughly a quarter in the last few months. However, if the team is allowed to reopen physical stores in time for Christmas this year, the stock could surge higher. As it stands, it’s priced for the worst-case scenario.

The post Will This Ultra-Cheap Stock Rebound Strongly Soon? appeared first on The Motley Fool Canada.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

Will This Ultra-Cheap Stock Rebound Strongly Soon?
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email