Is the Amigo share price a stock market crash bargain worth buying now?

The Amigo share price is facing some strong headwinds, but the company has a plan to turn things around over the next few months.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Amigo (LSE: AMGO) share price has plunged in value this year. The stock started 2020 changing hands at around 70p. However, following the coronavirus crisis, a management spat, and rising losses, shares in the business are now dealing at 13p.

Following this decline, the stock looks cheap compared to history. But that doesn’t necessarily mean the Amigo share price is a stock market crash bargain worth buying today. There are several other factors investors need to consider before buying into this moneylender.

Amigo share price problems

Amigo only became a public business two years ago. Unfortunately, since its IPO in June 2018, the company has lurched from disaster to disaster.

This year has been particularly painful for the company and the Amigo share price. In March, its founder, James Benamor, who owned nearly two-thirds of the business, called for the company to immediately cease lending operations and challenge regulators’ claims against the business. The Financial Ombudsman Service and Financial Conduct Authority have both been placing pressure on the corporation to pay compensation to borrowers who have complained about Amigo’s lending practices.

When the company ignored its founder’s request, Benamor tried to seize control of the business with a shareholder vote in June. This attempt failed. The Amigo share price fell further when the founder then announced that he’d be selling his entire 60%-plus shareholding.

A week later, the company published more bad news. It announced that it was suspending the publication of its full-year results and setting aside more cash to deal with a substantial increase in the number of customer complaints.

New blood

Amigo has now brought former CEO Glen Crawford back to try and turn its fortunes around. The CEO stepped down last year for health reasons. He helped take the business public in 2018.

However, only time will tell if Crawford will be able to turn things around. The lender has some severe issues. If customer complaints continue to rise, there’s a genuine chance the business could become insolvent. That would be bad news for the Amigo share price.

On the other hand, if the new management can bring compensation claims under control, Amigo might be able to return to growth.

Over the past few years, many of the organisation’s peers in the high-interest loan market have collapsed, which gives the company plenty of scope to take market share. At the same time, many people are facing financial difficulty in the coronavirus crisis, and Amigo could provide some help.

Therefore, the outlook for the Amigo share price is mixed. If the company can capitalise on the current environment and get rising claims under control, it may be able to return to growth. If not, the business may not last for much longer.

As such, it may be sensible to own the stock as part of a well-diversified portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves does not own any share 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.

More on Investing Articles

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »