Key points
- The recent market sell-off may be providing good buying opportunities
- IAG’s losses narrowed significantly for the 2021 calendar year
- Boohoo has a compound annual EPS growth rate of 31.8%
The escalating military conflict between Russia and Ukraine is continuing to appal the world and to negatively impact share prices. In particular, many companies operating in Russia have suffered. Evraz, a steel firm, is down 59% in the past week and 88% in the last year. Polymetal International, a gold miner, has fallen 73% in the past week and 87% over the past year. The move is much wider, however, with the FTSE 100 down 0.5% at the time of writing. This has prompted me to think about buying the dip. International Consolidated Airlines Group (LSE:IAG) and Boohoo (LSE:BOO) are two companies I currently own and I’m thinking of adding to. Let’s take a closer look.
Buy the dip: the travel recovery
Down 16% in the past week and 42% over the last year, the IAG share price has only been heading one way. It’s currently trading at 112p. For the 2021 calendar year, however, the company’s results were quite positive. Losses narrowed significantly to €2.7bn from €7.4bn in 2020. Furthermore, revenue over the period increased by just over 8%.
These results suggest that the firm is starting to benefit from the reopening of borders and resurgence of international travel. Given the recent sell-off of IAG shares, this could be a perfect time for me to buy the dip.
It should be noted, however, that any future variant could be a stumbling block for the recovery of international travel. In addition, rising fuel prices mean the cost of jet fuel will also likely rise in the near future.
Furthermore, Q4 2021 capacity increased to 58%. This was just 21.9% in Q2. As many more countries begin opening their borders and removing all pandemic-related restrictions, I think the future is bright for this airline industry giant.
A cheap growth stock
Similarly, Boohoo shares have fallen 14% in the past week and 78% over the last year. It currently trades at 65p. For the years that ended in February, from 2017 to 2021, earnings-per-share (EPS) grew from 2.23p to 8.89p. By my calculations, this results in a compound annual EPS growth rate of 31.8%. This is both impressive and consistent. I think it makes sense for me to buy the dip at the moment.
Furthermore, revenue over the same period increased from £294m to just over £1.7bn. This is a strong indication that Boohoo is growing quickly. That said, in an update for the three months to 30 November 2021, expected profit margins fell by around 2%.
Shares in this company may also be cheap. With a forward price-to-earnings (P/E) ratio of 15.02, this is lower than ASOS, a major competitor. ASOS has a forward P/E ratio of 22.99. This could suggest that I would be getting a bargain.
The recent sell-off provides me with a great opportunity to buy the dip. IAG has great potential as the world reopens and Boohoo displays strong growth. I will be adding to my current holdings of both companies.
