The Saga (LSE:SAGA) share price has gone through difficult times. Since its listing, the stock has lost over 94% of its overall value. In the past three years alone, the stock has suffered heavily. While it managed to gain some ground by soaring +12% in 2021, it plunged -64% in 2020 and a further 55% in 2022.

But the story in 2023 appears to be positive so far. Year to date, the stock has soared over 13%. This is far above the FTSE 100 and the FTSE-All Share indices, which are both negative. Is there a turnaround in Saga shares’ forecast?

Key points

• The Saga shares price has suffered heavily since the pandemic began.
• The business remains deeply impacted by Covid-19, but there are signs of recovery.
• Management has been restructuring the business to improve the strength of its balance sheet.

What does Saga do? 

Saga Plc is involved in the provision of general insurance, package and cruise holidays, and personal finance products aimed at a 50-and-over customer base.

Through its various operations, the travel stock offers insurance services in the car, home, health, boat, personal accident, holiday, and other areas. It also delivers package tours and products. Lastly, the company provides equity release and care funding advice, savings accounts, credit cards and wealth management services. 

The 50-year-plus population is seen as the fastest-growing one in the United Kingdom, and they have the most spending power. Beyond that, 27.9 million people are estimated to be over 50 years old by 2030 in the UK. This is a large number that can be served by this business and presents quite a growth opportunity, in my opinion.

So, how has the Saga share price performed over the years?

Historical performance of Saga stock

The company was founded in 1951 and was listed on the London Stock Exchange in May 2014. Saga shares opened trading on the stock market at 2,496.48p per share. Needless to say, it’s not trading near this historical price today after going through some pretty tough years. If I had bought the shares at the listing price, I would have lost most of my invested capital.

But does the low entry price present a buying opportunity for my portfolio? I don’t think so. At least not yet.

Saga share price forecast

The coronavirus heavily impacted Saga’s travel business. Though its cruise operations have resumed, the company has continued to suffer the effects of Covid-19.

In its January trading update, here is what Saga CEO Euan Sutherland had to say,

“Saga has delivered a successful second half of the financial year with our Insurance business remaining in growth and delivering positive momentum across all key metrics, while our cruise ships resumed their international itineraries. With a stronger Insurance business and progress being made in transforming our Travel business, our turnaround strategy is working well. While Omicron has impacted travel bookings through December and January, our outlook for Cruise in 2022/23 and beyond is positive.”  

That certainly sounds like a promising recovery story. But despite this positive outlook, the company has been losing a lot of money even before the pandemic entered the picture. This is reflected in its last three annual reports, where the company’s balance sheet has continued to suffer.

Skip ahead to July, and management came out with another trading update. The firm’s cruise load factor hit 73%, up from 68% six months before. And its insurance segment customer retention stands at a decent 83%.

I can’t deny there is progress being made in restoring the group’s cash flow and earnings. Unfortunately, it seems investors are expecting more, especially now that interest rates are on the rise. The group’s total debt is still substantial. However, it’s worth noting that none of its loan obligations mature until 2024, giving a bit of breathing room.

Highlights of its 2023 financial year

As the company puts the pandemic beyond it, all its businesses have resumed operations. In its report, Saga’s underlying profit before tax was £21.5m compared to a loss of £6.7m in 2022. Also, underlying earnings/loss per share jumped from a loss of 11.1p to a gain of 11.9p in 2023 so far. However, Saga’s loss before tax plunged from £23.5m to £254.2m.

Although Saga appears to be on track, it has to reduce its debt portfolio, increase its profitability and enlarge its business. At least, that’s what I think.

In my opinion, the Saga share price has the potential to recover. And it seems several analysts agree with price predictions of up to 190p, previously 310p per share. But there are still plenty of unknown factors which may drag down the recovery speed.

Final thoughts on the Saga share price forecast

While the Covid-19 pandemic appears to be a thing of the past, its blows on Saga plc are still being felt. Interestingly, the group undertook a restructuring of its Tour Operations which has been completed.

This has better placed the company for growth, opening the door to eventually restoring underlying profit and dividend income potential, I feel. But personally, I think there are better investment opportunities for my portfolio elsewhere.

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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.