Is it worth investing in Currys right now?

Someone who bought shares in Currys at the beginning of the year is sitting on a return of more than 60 per cent, thanks to the takeover interest that has swirled around the electrical goods retailer. Yet it is still one of the cheapest retail businesses listed in London.

The chain formerly known as Dixons Carphone sells everything from televisions to dishwashers. It has more than 700 stores, about 300 of which are in Britain, and employs 15,000 people. It operates in eight other countries, having expanded into Scandinavia 25 years ago through its acquisition of the Elkjop brand, and has leading market shares in both Britain and the Nordic nations, at 23 per cent and 28 per cent, respectively.

Its shares hit highs of 156p during the pandemic, but since then they have been hit by poor performance in the Scandinavian market, where price competition has been intense, as well as by a slowdown in sales in Britain during the cost of living crisis.

Weakness in the shares lured in two take-private offers this year from Elliott, the American hedge fund, and JD.com, a Chinese online retailer. Ultimately, both bidders walked away. Elliott gave up after its two approaches, first at 62p and then at 67p a share, valuing the chain at £757 million, were turned down. The Currys board said the offers “significantly undervalued the company and its future prospects”.

With today’s shares changing hands for north of 80p, it seems the board was right. Currys appears to be making progress well enough on its own. A trading update this week revealed a 5 per cent rise in revenues in the UK and Ireland, where it makes more than half its total sales. In the Nordics, where it makes roughly two fifths of its top line, like-for-like revenues dropped by 2 per cent and the company noted that the consumer environment there “remains weak”. At the very least, it looks like the market is beginning to stabilise, given that this time last year it said that sales had dropped by 8 per cent.

Currys’ balance sheet has long been a concern for investors, partly because of the pension obligations it inherited from its merger with Carphone Warehouse in 2014. Yet debt is falling. In April it completed the sale of Kostovolos, its Greek business, for which it received net cash proceeds of £156 million. That took its net cash position to £96 million as of the end of its financial year that month, compared with net debt of £97 million in the year before. Meanwhile, its pension liability stood at £171 million at the end of April, compared with £250 million in 2023. Contributions to the old defined-benefit pension scheme are expected to end in 2029.

Bulls are hoping that Currys will be able to capture the next upgrade cycle for smartphones and personal computers. Indeed Alex Baldock, Currys’ chief executive, highlighted that AI-enabled computers were selling well and that its iD mobile network service offering had more than 1.9 million subscribers, up by more than a third year-on-year.

Currys’ shares trade at an undemanding multiple of 8.9 times forward earnings. This places the stock at a significant discount to the rest of its peer group. Rivals such as AO World, WH Smith and Dunelm trade at multiples of 22.8, 14.5 and 17.1, respectively.

The company decided not to reinstate its dividend this year, which was disappointing for some shareholders since its yield has averaged at 4 per cent over the past five years. Still, this was probably a prudent decision, given the lingering worries over the health of its balance sheet and it did say that it would consider resuming cash payouts over next year.

Even with the recent rally in the share price, it seems too early to rule out further takeover interest, given the low multiple on the stock. Advice Buy Why Low multiple, improving performance and stronger balance sheet

EasyJet just managed to escape relegation from the FTSE 100 this week, thanks to a last-minute rise in the share price, but how long can the budget airline operator hold on to its status as one of the biggest companies listed in London?

Recent have been difficult. Even though sales, profits and dividends have recovered from the pandemic, shares in the business are still worth less than half their value in 2019.

The airline now has a medium-term aim over the next three to five years of generating more than £1 billion in pre-tax profit, more than double pre-pandemic levels and the £432 million at the end of its last financial year. About a quarter of this is expected to come from its higher-margin holiday business.

So far it appears to be progressing well. Pre-tax profits in the third quarter of this year rose by 16 per cent to £236 million, helped by a 49 per cent rise in its holiday business to £73 million. EasyJet now expects this part of the business to deliver more than £180 million in profit by the end of this year, which would represent at least 48 per cent growth compared with 2023.

The carrier’s growth ambitions look feasible, but investors should note that the shares remain sensitive to wider economic forces. Changes in the price of fuel can affect appetite for the stock. The company also will face a new test when Kenton Jarvis, its finance director, moves up to chief executive early next year after the departure of Johan Lundgren, who has been in the top job for the past seven years.

That being said, the shares are not particularly expensive, trading at a forward price-to-earnings multiple of 7.8. This puts easyJet somewhere in the middle of the pack, ahead of Wizz Air at 5.4 but below the Dublin-listed Ryanair at 11.8. This column last rated easyJet as a “hold” in December, citing its vulnerability to economic factors. Since then the shares have delivered a modest total return of 1.6 per cent. Advice Hold Why Good progress, but shares vulnerable to economic volatility