Stock market

Marks and Spencer’s share price decline! Is this my buying opportunity?

Image source: M&S Group plc

gave Marks and Spencer The group (LSE: MKS ) share price is down 6.5% in 2024 as I write. This is in stark contrast to his performance in recent times.

Over the past year, its share price has been steadily rising. During that time, the stock has gained 55.7%. During the same period, FTSE 100 Only 2.5 percent is up.

I am wondering if this dip is an opportunity for me to come in and pick up some shares. Let’s find out.

The road to recovery

With its impressive rise, it means its share price sits at 257.8p. As a result, the British icon recently made a comeback in footsie.

It has been a long journey for the company. M&S has struggled for years as it seemed to have been crushed by its competition. The retail company built its name on providing the highest quality. However, much of its operation seemed outdated and out of fashion.

But now things seem to be on the upswing. And over the past few years, the business has devised a turnaround strategy that has helped it turn its fortunes around.

CEO Stuart Machin is playing a key role in bringing the business back into the 21st century. It has taken steps such as closing down flagging high street stores and pushing to promote its online channels. Safe to say, it’s working.

Impressive change

For the 26 weeks ending 30 September 2023, pre-tax profits rose 56.2% year-on-year to £325.6m. Food sales also grew by a solid 14.7 percent.

Its January update on Christmas trading also showed group sales were up 7.2% on the previous year. All of this is even more impressive when you consider that we are in the midst of a cost-of-living crisis.

But even after that rally, I think the stock still has value. Today, its shares trade at a price-to-earnings (P/E) ratio of about 13. This is below the long-term footsie average of between 14 and 15.

Looking ahead, it predicts that its P/E ratio could fall below 10 by 2025. I feel valued.

still not In the clear

This is all positive news. However, there are a few risks I should consider. While it may seem like we’re past the worst of inflation and interest rate hikes, we’re not out of the woods yet. Higher rates squeeze consumers’ pockets. It always has the potential to hurt the firm’s sales.

High inflation also threatens to increase wages and increase spending. The business recently announced it would take out £89m as it rewards 40,000 staff with raises.

Time to buy?

Even with that in mind, I still like where M&S is going. Business has made a strong recovery. And with January and February retail sales figures coming in hotter than expected, I believe better times are ahead for retailers.

Falling interest rates will also boost business. This should increase costs.

I’m not expecting the stock to replicate its performance over the past 12 months, but I believe it has a lot to offer. If I had the cash I would open a position. I think investors should also consider the shares.

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