Tesco: Classic "Value" Stock With 10x P/E & 5.8% Dividend Yield
(Preview) Initation of Coverage (TSCO LN) (Buy)
Summary
Tesco, the largest grocer in the U.K., is a classic "value" stock and a potential opportunity for investors not bearish on the U.K.
Shares fell to a new 5-year low last week after H1 FY23 results, and are at 9.6x FY23 consensus EPS and a 5.8% Dividend Yield.
EBIT has been in decline and fell 9.8% in H1, but largely as a result of post-COVID normalization and current U.K. macro headwinds.
Tesco's U.K. business is strong, holding its market share in groceries and benefiting from growth in its Booker wholesale business.
At 199.6p, Tesco is a Buy with forecasted total return of 31% (12.7% annualized) by February 2025, but more suitable for some investors.
Introduction
We review Tesco PLC, the #1 U.K. grocery chain by sales, after shares in London fell to a new 5-year low following the release of H1 FY23 (ending August 31, 2022) on Wednesday (October 5).
Tesco shares are now trading at a 9.6x P/E, a 10%+ Free Cash Flow Yield and a 5.8% Dividend Yield, having fallen 31% year-to-date, despit…