This FTSE 250 stock is up 30% in July! Should I buy it now?

After I see a FTSE 250 inventory rise by 30% in simply over two weeks, I take discover.

In spite of everything, corporations listed within the UK’s mid-cap index are usually pretty giant and properly established. If their share costs instantly shoot up, it’s typically an indication of robust buying and selling and upgraded revenue forecasts.

The highest FTSE 250 riser in July (thus far!)

Ocado (LSE: OCDO) is an effective instance. The retail expertise specialist’s share worth rose by round 10% on Tuesday 16 July, after the corporate mentioned it expects to generate extra underlying money move than anticipated this 12 months (earlier than varied bills).

Ocado shares are actually up by 30% thus far in July on the time of writing, making it the index’s greatest performer this month.

The shares are nonetheless a great distance beneath their pandemic excessive. However to me, it appears to be like like issues would possibly now be transferring in the fitting route for Ocado.

Ought to I think about shopping for some shares now, forward of any attainable additional features? Let’s have a look.

Why I’m

I like investing in FTSE 250 corporations. Lots of the shares in my primary private portfolio are members of the mid-cap index. I like them as a result of they’re sufficiently small to develop, however giant sufficient to be confirmed, worthwhile companies.

Ocado ticks virtually all of those containers. It was based in Hatfield, north of London, in 2000. Right this moment, it has buyer operations in Asia, North America, and Europe, in addition to the UK.

The corporate’s automated warehouses and robotic selecting techniques are very intelligent. We all know they work, partly as a result of the corporate additionally makes use of its personal expertise to run a grocery supply enterprise within the UK, in partnership with Marks & Spencer.

Ocado now has a rising buyer base of different retailers who pay to make use of its expertise.

Founder and CEO Tim Steiner believes that promoting this expertise to different retailers will probably be very worthwhile in the future.

Nonetheless, that day hasn’t come but. Though Ocado’s annual turnover is anticipated to hit £3bn this 12 months, the corporate has by no means made a significant revenue.

Dealer forecasts recommend Ocado will report an annual lack of round £350m in 2024. Final 12 months, the determine was £387m.

Will Ocado make a revenue – and will I purchase?

The newest dealer forecasts I can see stretch to 2026 and nonetheless present the enterprise making a lack of greater than £250m.

I’m keen to imagine the corporate will ultimately turn out to be worthwhile. However with a market cap of £2.8bn as I write, I feel a few of this hope is already priced in.

Even when I used to be keen to pay 20 instances forecast earnings for Ocado shares, that may nonetheless equate to an annual revenue of round £140m.

That’s a great distance above this 12 months’s forecast lack of £350m.

I feel it’s attainable that Ocado might rapidly swing to revenue when most of its present crop of tasks are accomplished and producing charges. It’s additionally price remembering the corporate is beginning to increase past grocery retail, opening new alternatives.

Nonetheless, Metropolis analysts – who’re higher knowledgeable than me – don’t suppose Ocado will make a revenue in 2025 or 2026.

For me, 2027 and past is simply too lengthy to depend on hope alone. I gained’t be shopping for.