Is this an easy way of identifying potentially cheap FTSE shares?

Day by day, I check out the largest FTSE share worth actions – up and down. In relation to the winners, I don’t count on the shares in my portfolio to seem. Most of my investments are in FTSE 350 corporations, whose share costs are usually extra steady, with giant each day upwards actions being uncommon.

Thankfully, this implies my shares normally don’t seem within the record of fallers both. However I’m lifelike sufficient to know there are by no means any ensures relating to investing within the inventory market.

Nonetheless, it’s the losers that proceed to curiosity me essentially the most. That’s as a result of — I imagine — buyers usually over-react to unhealthy information, generally sending a share worth decrease than is justified.

A foul day on the workplace

An instance of this occurred on 3 September.

The share worth of Hilton Meals Group (LSE:HFG) tanked 17% after buyers took a dislike to its interim outcomes for the six months ended 30 June (H1 25). The corporate is a provider of meat, seafood, vegan, and vegetarian meals to clients in Europe, Australia, and New Zealand.

Don’t get me incorrect, I’m not saying the outcomes had been significantly spectacular. In any case, a 0.4% fall in adjusted working revenue, in comparison with the identical interval in 2024, isn’t what you’d count on from a listed enterprise.

As well as, the corporate recorded a web money outflow of £30.8m in comparison with an influx of £30m in H1 24. Additionally, over the previous 12 months, web debt has elevated by £65.4m.

A better look

Nonetheless, the corporate stated it expects “to ship full-year outcomes throughout the vary of expectations”. The consensus of analysts is for a pre-tax revenue of £76.8m-£81m. It made £61m in 2024.

On this foundation, I feel wiping round £150m off the group’s market cap is unjustified. That is significantly the case when the rise in its web debt is defined by “elevated tactical stock holding” and extra capital expenditure. It’s not as if the group’s been losing its surplus money.

And it introduced a 5.2% enhance in its interim dividend. When added to final yr’s remaining payout, at present’s share worth crash means earnings buyers is perhaps tempted by the inventory’s wholesome yield of 5.1%.

Been right here earlier than

But it surely’s not the primary time that the group’s shareholders have suffered. In September 2022, on the day it issued a revenue warning, its share worth tanked 28%.

This is only one instance of how investor endurance has been examined in recent times. In April 2022, the shares had been value over 80% greater than they’re at present.

A extra constructive view

Nonetheless, I feel there are many causes to contemplate at present’s response by buyers as a mistake.

The group’s plans to increase internationally stay on schedule. It’s as a result of begin buying and selling in Saudi Arabia with a three way partnership associate within the second half of 2026. And it plans to launch a brand new enterprise in Canada in 2027.

And if it does meet analysts’ expectations this yr, it means the inventory’s buying and selling at round 12 instances ahead earnings. Others within the sector, together with Cranswick, Kerry Group, and Greencore Group, appeal to the next a number of.

That’s why I feel at present’s share worth motion means Hilton Meals Group is a inventory for buyers to contemplate. And why I feel giant share worth falls are value preserving an in depth eye on.