European and US stocks mixed as US inflation meets expectations

The travel retailer was hit hard during the COVID pandemic but has made a strong comeback with a “good” start to the financial year. However, the share price has collapsed 44% over the past five years and investors may question their decision to hold the stock.

“WH Smith last reported that strong trading momentum continued into the second half of the year. That was just a month ago and with the summer peak season still to come, investors are not expecting too much of a change. Earnings growth in the first half was slower than sales, so investors will be watching to see if easing inflation gives margins a boost,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

While the overall market rose by around 12% last year, WH Smith shareholders lost 26%, including dividends. Nevertheless, there are growth opportunities for the company.

“The market is not expecting a major acceleration in growth in the second half of the year, despite the growing presence of travel centers, so there is potential room for improvement over the rest of the year,” Nathan said.

“There is a significant opportunity to gain market share overseas, particularly in North America. Analysts will therefore be looking more closely at new openings, of which around 110 were last expected in the current financial year. The complex comprises a total of around 1,300 travel stores, just under half of which are in the UK. Travel is now the dominant branch, with more than double the number of stores on the high street.”

For investors, the retailer is considered a cheap FTSE 250 stock, as its shares have a price-earnings ratio (PEG) of just 0.9.

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