Latest news with #TescoPLC
Yahoo
2 days ago
- Business
- Yahoo
Those who invested in Tesco (LON:TSCO) three years ago are up 74%
One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Tesco PLC (LON:TSCO) share price is up 53% in the last three years, clearly besting the market return of around 11% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 32% in the last year, including dividends. With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. During three years of share price growth, Tesco achieved compound earnings per share growth of 6.9% per year. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Tesco's earnings, revenue and cash flow. As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Tesco, it has a TSR of 74% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments! It's nice to see that Tesco shareholders have received a total shareholder return of 32% over the last year. Of course, that includes the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Tesco better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tesco that you should be aware of. Tesco is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
11-05-2025
- Business
- Yahoo
Some May Be Optimistic About Tesco's (LON:TSCO) Earnings
Shareholders appeared unconcerned with Tesco PLC's (LON:TSCO) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong. We've discovered 1 warning sign about Tesco. View them for free. Importantly, our data indicates that Tesco's profit was reduced by UK£329m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Tesco doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Because unusual items detracted from Tesco's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Tesco's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 19% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Tesco at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Tesco. This note has only looked at a single factor that sheds light on the nature of Tesco's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
11-05-2025
- Business
- Yahoo
Some May Be Optimistic About Tesco's (LON:TSCO) Earnings
Shareholders appeared unconcerned with Tesco PLC's (LON:TSCO) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong. We've discovered 1 warning sign about Tesco. View them for free. Importantly, our data indicates that Tesco's profit was reduced by UK£329m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Tesco doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Because unusual items detracted from Tesco's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Tesco's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 19% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Tesco at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Tesco. This note has only looked at a single factor that sheds light on the nature of Tesco's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
10-05-2025
- Business
- Yahoo
Tesco PLC (LON:TSCO) Is About To Go Ex-Dividend, And It Pays A 3.6% Yield
Tesco PLC (LON:TSCO) is about to trade ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Tesco's shares before the 15th of May in order to receive the dividend, which the company will pay on the 27th of June. The company's upcoming dividend is UK£0.0945 a share, following on from the last 12 months, when the company distributed a total of UK£0.14 per share to shareholders. Looking at the last 12 months of distributions, Tesco has a trailing yield of approximately 3.6% on its current stock price of UK£3.777. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing. Our free stock report includes 1 warning sign investors should be aware of before investing in Tesco. Read for free now. If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tesco paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 62% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations. It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously. View our latest analysis for Tesco Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Tesco has grown its earnings rapidly, up 20% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Tesco could have strong prospects for future increases to the dividend. Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tesco has seen its dividend decline 3.1% per annum on average over the past 10 years, which is not great to see. Tesco is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits. From a dividend perspective, should investors buy or avoid Tesco? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Tesco is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there. While it's tempting to invest in Tesco for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Tesco you should be aware of. A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
09-03-2025
- Business
- Yahoo
Is There An Opportunity With Tesco PLC's (LON:TSCO) 39% Undervaluation?
Tesco's estimated fair value is UK£6.27 based on 2 Stage Free Cash Flow to Equity Current share price of UK£3.80 suggests Tesco is potentially 39% undervalued The UK£4.07 analyst price target for TSCO is 35% less than our estimate of fair value Today we will run through one way of estimating the intrinsic value of Tesco PLC (LON:TSCO) by projecting its future cash flows and then discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. See our latest analysis for Tesco We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£1.74b UK£2.23b UK£2.13b UK£2.16b UK£2.28b UK£2.31b UK£2.35b UK£2.39b UK£2.44b UK£2.49b Growth Rate Estimate Source Analyst x4 Analyst x5 Analyst x5 Analyst x2 Analyst x2 Est @ 1.30% Est @ 1.60% Est @ 1.81% Est @ 1.96% Est @ 2.06% Present Value (£, Millions) Discounted @ 7.1% UK£1.6k UK£1.9k UK£1.7k UK£1.6k UK£1.6k UK£1.5k UK£1.5k UK£1.4k UK£1.3k UK£1.3k ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = UK£15b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.1%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£2.5b× (1 + 2.3%) ÷ (7.1%– 2.3%) = UK£53b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£53b÷ ( 1 + 7.1%)10= UK£27b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£42b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of UK£3.8, the company appears quite good value at a 39% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Tesco as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.1%, which is based on a levered beta of 0.939. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Consumer Retailing market. Opportunity Annual earnings are forecast to grow for the next 4 years. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the British market. Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Tesco, we've compiled three further factors you should explore: Risks: We feel that you should assess the 1 warning sign for Tesco we've flagged before making an investment in the company. Future Earnings: How does TSCO's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the LSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
