Over the past month, Next plc (LON:NXT) (NXT.L) has fallen in price from over 4100p to 3653p at the time of writing. While this hasn’t been great for me personally as I hold it in my portfolio, can this provide a buying opportunity?
I believe it can – but only at the right price. The fundamentals are currently very attractive in my view, with Next having a relatively low PE of 8.37. The visible dividend yield is 4.32%, but when the special dividend is taken into account it is yielding around 8%.
Since January, there have been numerous director buys. The last large purchase was £418,000 on 27 March by Michael Roney, the Deputy Chairman. He bought at 4180p, so buyers of Next shares today would be getting a cheaper price than that.
Overall, Next has a strong balance sheet and a good free cash flow yield according to my research. The dividend cover of 2.79 for 2017 is relatively high, and a 2.8 rate for 2016 shows that the company is being prudent and carries a good margin of safety with its dividends to my mind.
I have been into several Next stores and even done courier deliveries for the company – there is still a demand for their products as far as I can tell. I would be comfortable in buying more Next shares around this level. If I could get it for around 3600p then I would consider that to be a real bargain.
I am still bearish on Bohoo.Com PLC (LON:BOO) (BOO.L). The shares have fallen since trading at over 260p in early June. At the time of writing they are 224.25p. Even after this fall, the PE is still 103.8 and there is no dividend yield at the present time.
I would avoid Boohoo at these levels and would probably sell the company if I had any. I feel there are better risk/reward opportunities available elsewhere.