2 FTSE 100 fallers with recovery potential

A wide range of FTSE 100 shares have delivered very disappointing performances in the first quarter of the year. For example, precious metals miner Fresnillo’s (LON: FRES) share price has dropped by 13% year-to-date. Meanwhile, property website Rightmove (LON: RMV) has generated a negative return of 20% so far in 2022.

While further declines for both shares cannot be ruled out in the near term, their lower prices could mean they offer better value for money on a long-term view. With sound strategies and growth opportunities ahead, they could reverse recent declines to outperform the FTSE 100 index over the coming years.

Fresnillo

Fresnillo’s share price has been held back of late by operational challenges that are expected to persist for at least part of the current year. Factors such as labour reforms in Mexico and the continued impact of Covid-19 on worker absences contributed to a mixed production performance in the 2021 financial year. Furthermore, new project delays mean that production is unlikely to rise in the current year.

Despite this, the company’s outlook could be bolstered by heightened demand for precious metals. Gold, in particular, has a long history of performing relatively well during periods of high inflation that seem likely to remain prevalent beyond the near term. Additionally, its defensive appeal could rise as geopolitical challenges such as the war in Ukraine remain present.

As a result of an expected buoyant price for gold, Fresnillo is forecast to generate an annualised rise in earnings per share of 8.5% over the next two financial years. Since the stock trades on a price-earnings ratio of 16.8, it seems to offer fair value for money.

Fresnillo’s new development projects are expected to come onstream later this year. More projects are likely follow suit in the next few years and could have a material impact on its production capabilities. This could act as a catalyst on its profitability and lead to FTSE 100 outperformance in the long run.

Rightmove

Rightmove’s share price has been negatively impacted over recent months by the increasingly challenging macroeconomic outlook. High inflation means that further interest rate rises are more likely, which could lead to more difficult operating conditions for the property industry. Indeed, the cost of living crisis may lead to a marked slowdown in what has been a ‘hot’ housing market over the past couple of years.

Even after its recent share price decline, the firm continues to trade on a rich valuation. For example, it has a price-earnings ratio of 29.2. For some investors, this will be difficult to justify – even when its growth prospects over the next couple of years are considered. The company’s bottom line is expected to rise by around 10% per annum between financial years 2021 and 2024.

However, Rightmove’s competitive advantage means that it continues to offer long-term investment appeal. It has a hugely dominant market position that has proven extremely difficult to for rivals to penetrate. Furthermore, it has a long track record of introducing innovative products, such as in the tenant services and mortgage segments in recent years, to diversify its offering and improve its growth prospects.

Therefore, while the company’s shares are by no means cheap and their near-term prospects could be challenging, they nevertheless appear to offer long-term recovery potential.