Will Saga shares recover? Is the company in trouble?

Summary 

• Saga has lost nearly 90% of its market capitalisation in last five years
• the stock has amassed a gain of 49% over the stretch of last 12 months
• The aftermath of Covid has furthered the complicatedness for the business

Shares of Saga Plc (LON: SAGA), the Kent-headquartered insurance-to-financial services provider, have been extremely volatile since the last five years. The value erosion has been so much so, the company has lost nearly 90% of its market capitalisation in the corresponding period.

According to the historical data available with the London Stock Exchange, the stock of Saga stands with a loss of little more than 55% from the pre-pandemic high of GBX 743.82 as on 2 January 2020. The shares recognised a fresh 52-week bottom of GBX 118.50 on 20 October 2020 as extended restrictions on businesses continued to hurt the operations.

Surprisingly, the stock has amassed a gain of more than 49% over the stretch of last 12 months, with a considerable portion of rise coming after the clinical breakthrough in the vaccine development and country-wide roll-out of the immunisation programme.

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Looking at the 52-week return and performance of the shares clearly indicates a fighting potential of the company with the enterprise grappling to retrace its commercial operations to a level seen during the pre-pandemic era.

However, no one can ascertain the likelihood of a meaningful performance in the upcoming months merely on the basis of the past performance, especially when it comes to judging the viability of a share that has remained on a topsy-turvy ride.

The stock cracked to a 52-week low of GBX 170.89 (16 March 2020), following the emergence of coronavirus pandemic. It recoiled back, making a high of GBX 371.30 in May of 2020. Again, in the same year, the shares plunged to a new low of GBX 118.50 on 20 October.

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There were operational strains with the enterprise, the aftermath of Covid with the businesses coming to a standstill furthered the complicatedness. With the massive reopening of sectors and withdrawal of the lockdown restrictions in the country are likely to have a positive impact on the downtrodden businesses, effectively paving the way to bring back the pre-Covid-level sales and receivables.

Very recently, the company exercised a GBP250 million bond offering in order to prepare for upcoming business opportunities through which the group can make an eventful comeback. The bond issuance with a coupon rate of 3.375% was primarily issued to obtain financial flexibility, while the company plans to resume cruise operations. Subsequent to the termination of offer period, the company received valid tenders worth equivalent of GBP173.49 million.