FTSE 100-member Next’s share price surges 20%, but is there still time to load up?
Since the start of the year, Next(LSE: NXT) has recorded a near-20% rise in its share price. Given the wider retail sector’s disappointing performance during that time, such a robust performance is highly impressive. It suggests that the FTSE 100 stock has a resilient business model which is able to perform well even in challenging operating conditions.
Of course, Next isn’t the only share which has enjoyed a prosperous 2018. Reporting on Wednesday was a company that has almost doubled since the start of the year. Is it too late to buy either stock? Or are further gains ahead?
Improving performance
The latter company in question is specialist provider of people-screening technology, Thruvision(LSE: THRU). It released a trading update which showed that it’s made strong progress in the half-year to 30 September. It has delivered a total of 60 units during the period to both new and existing customers, which is up on the 57 units ordered in the same period of the previous year.
It has received repeat orders from the Philippines, Vietnam and China. New customers include Los Angeles Metro, where units are being deployed to help detect and deter acts of terrorism. In an increasingly security-conscious world it would be unsurprising for its screening products to become more popular over the coming years. The company has also won new customers in the Entrances and Loss Prevention markets, with the potential for further growth in both areas over the long term.
Thruvision’s plans to expand production are progressing as expected. Its US manufacturing partner has produced its first units. As such, and while it remains a relatively small and volatile stock, its investment outlook appears to be positive.
Growth potential
While Next’s share price may have made strong gains so far in 2018, its price-to-earnings (P/E) ratio of 14 suggests that there could be further rerating potential ahead. The company’s sales performance has been encouraging, but continues to be rather mixed. Online sales growth is impressive, while in-store sales continue to decline. This trend is likely to persist over the medium term, as shoppers transition increasingly towards online purchases. With the company having a foothold in this area, its business may gradually adapt to changing customer tastes.
Looking ahead, Next is forecast to post a rise in earnings of 4% in the current year, and in the next financial year. While this may not be a high rate of growth versus other FTSE 100 shares, given the difficult operating conditions facing the business it could prove to be a solid performance.
With the company’s management team having experience of coping with a tough consumer outlook in recent years, the resilience of the business may provide it with appeal to long-term investors. Therefore, while a further 20% rise in its shares in the next nine months may not be achievable, there seems to be significant upside potential on offer over the coming years.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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