FTSE 100 business Informa (LSE: INF) The pandemic suffers virtually more than any other good company. But despite that problem, the market now puts high value on stocks. But I don’t think this business is worth this premium rating.
FTSE 100 strains to avoid
Informa is one of the largest event businesses in the world. We also offer business intelligence services. 2019 was a shocking year for the group. Sales reached a record high of £ 3 billion and net income increased to £ 225 million.
Unfortunately, music stopped in 2020. The pandemic has forced event organizers to cancel plans virtually overnight. As a result, sales in the FTSE 100 business plummeted. City analysts believe the company will report a 50% reduction in revenue for fiscal year 2020.
Based on these forecasts, the Group’s stocks are currently changing hands in multiples of over 50 futures price-earnings ratios (P / E). I think it’s too expensive.Investors Very optimistic Informa will be allowed to resume the event next year and revenue will recover soon. In my opinion, this assessment leaves no room for error if the company fails to meet these expectations.
So I don’t think the risk / compensation ratio of owning shares at current levels is attractive. Therefore, I would like to avoid this FTSE 100 stock now.
On the contrary, the outlook for paper and packaging producers is Smart Fit Kappa (LSE: SKG) It’s very encouraging.
The e-commerce market is booming. Online retail sales as a percentage of total sales jumped from 20% before the pandemic to about 36%. All of these items must be packaged. Smurfit is one of the largest providers of this package in the world.
Over the last decade, the FTSE 100 Group has grown in size with a series of acquisitions. These transactions helped the company achieve economies of scale, lower costs and increase profit margins.
The group also has a competitive advantage as it has its own ownership Forestry and recycling business.. This helped companies navigate the impact of pandemics on their supply chains.
City analysts predict that the Group’s net profit in 2020 will be € 563 million. This will be compared to € 476 million in 2019. I think this shows how the booming e-commerce market has benefited businesses over the last 12 months. Revenues in 2021 are projected to increase to an additional € 640 million.
These growth forecasts are exciting and I think they are inferior to Informa’s mixed and uncertain future. Based on its growth potential, I believe Smartfit deserves a higher rating than Informa. It’s not. The stock of the packing company is traded at a price-earnings ratio of 16.4 in 2021. That seems too cheap for me. In addition, the FTSE 100 business offers a dividend yield of 3.1% at the time of writing.
Rupert Hargreaves does not have a position in any of the listed shares. The Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by considering different insights, Better investors than us.
1 FTSE 100 share to buy today and 1 share to avoid
https://www.fool.co.uk/investing/2021/01/24/1-ftse-100-stock-id-buy-today-and-1-id-avoid/ 1 FTSE 100 share to buy today and 1 share to avoid