UK stock report - Tesco

UK

Tesco rises for a third consecutive day, a three-day rise of 1.5% October 20, 2017 16:30 BST

NEWS BITES - EUROPE

Tesco PLC (L:TSCO), the largest Food & drug retailers company by market cap in the United Kingdom, has risen GBX1.55 (0.8%) for a third consecutive day on Friday. This brought its three-day rise to GBX2.85 (1.5%), compared with the FTSE 100 Index which rose 7.1 points (0.1%) in the three days for a relative price increase of 1.4%. Cumulative volume in the 3 days was 0.8 times the average 3-day volume of 27.8 million shares. The stock last traded at GBX188.90.

Highlights in today's Report:

SECTION 1 BULLISH SIGNALS

Fundamentals, Technicals, High Performance Indicators

SECTION 2 BEARISH SIGNALS

Fundamentals, Overvaluation [compared with sector average], Technicals, Low Performance Indicators

SECTION 3 PRICE VOLUME DYNAMICS

Technicals, Moving Annual Return, Beta, Turnover Rate & Turnover Period

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, Annual Report for the year ended February 25, 2017 (year-on-year comparisons with previous corresponding period)-, Trailing 12 Months Dividends

SECTION 6 PROFILE

Activities, Industry & Sector, Top Management, Issued Capital

SECTION 7 REPORTED BUYING AND SELLING

SECTION 8 STOCK BUZZ

SECTION 1 TESCO BULLISH SIGNALS

1.1 Fundamentals:

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.4. Compared with the rest of the market the stock is undervalued and ranks in the top quartile of stock by value of Q Ratio.

+ Revenue growth rate has shown signs of recovery in recent years. [Year ended, all figures in %]

YearRevenue GrowthEBITDA Growth
Feb 173.9-5.6
Feb 16-38.5-

1.2 Technicals:

+ The price increased 1.2% in the last week and 1.8% in the last month.

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 186.65 minus the 26-day EMA of 185.44 is positive 1.21 suggesting a bullish signal. Both EMA prices are rising, another bullish signal.

+ The present value of GBP1,000 (PV1000) invested twenty years ago in Tesco is GBP1,807, including a capital gain of GBP616 and dividend reinvested of GBP191.

+ 20 years Multiplier in GBP = 1.807x

+ Compound Annual Growth Rate (CAGR) in GBP = 3.0%

Oct 20, 2017: GBP 1 equals USD 1.32

1.3 High Performance Indicators:

DescriptionValueRank In Market
Today's TurnoverGBP47.9 million (US$63.2 million)In Top 2%
Price to Sales0.4In Top Quartile
Price Change %0.8In Top Quartile
Volatility %1.1In Top Quartile
Price/MAP501.03In Top Quartile

SECTION 2 TESCO BEARISH SIGNALS

2.1 Fundamentals:

+ The relative yield of the stock, defined by its yield of 0.5%, divided by average yield of dividend yielding stocks in the FTSE 100 Index of 3.5% is 15.3%. This suggests the stock is overvalued in dividend yield terms.

+ Total Liabilities/EBITDA of 38.9 which compares unfavourably with the Joseph Piotroski benchmark of 5.

+ As per the Du Pont analysis, Return on Equity is less than stellar at 0.7%. This is computed as net profit margin of 0.1% times asset turnover [sales/assets] of 1.2 times leverage factor [total assets/shareholders' equity] of 7.1.

2.2 Overvaluation [compared with sector average]:

+ Price to Book of 5.5 [3.1].

+ Return on Equity 0.7% [6.1%].

+ Return on Capital Employed 3.9% [5.7%].

+ Dividend yield of 0.5% [2.0%].

2.3 Technicals:

+ The present value of GBP1,000 (PV1000) invested one year ago in Tesco is GBP907, comprising a capital loss of GBP98 and dividend reinvested of GBP5.

PV10001-week1-month1-year
TSCO.L1,0121,024907
FTSE 100 Index9991,0201,071

2.4 Low Performance Indicators:

DescriptionValueRank In Market
Return on Assets [ROA] %0.1In Bottom 1%
EBITDA Margin %1.8In Bottom 4%
Total Debt to Equity1.5In Bottom Quartile
Return on Capital Employed [ROCE] %3.9In Bottom Quartile

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Technicals:

+ Volume: there were 25,373,007 shares worth GBP47.9 million (US$63.2 million) traded today. In the past week, volume was 0.8 times average and the shares were up 1.2%. The volume was 0.9 times the average daily trading volume of 27.8 million shares.

+ Tesco is at a discount of 13.4% to its 12-month high of GBX218.23 on December 09, 2016. It is also at a premium of 14.9% to the 12-month low of GBX164.47 on June 26.

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 3 out of 5 years.

TSCOClose (GBX)Dividends (GBX)Capital Gain / (Loss) %% YieldAnnual Return %
Oct 20188.91(9.8)0.5(9.3)
1 Yr ago209.47-8.8-8.8
2 Yrs ago192.571.1611.70.712.3
3 Yrs ago172.4310.13(51.1)2.9(48.2)
4 Yrs ago352.4916.4215.626.6

Close 5 years ago GBX291.35

3.3 Beta:

+ Beta: the Beta of Tesco stock is 1.1. A Beta greater than 1 suggests this is a high risk, high return stock with volatility greater than that of the market.

3.4 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 85.7% (or a turnover period of 1 year 2 months). This average length of ownership of the stock at 58.5 times the average holding period of 7 days for stocks in the FTSE 100 Index suggests a larger number of core investors, making a long-term investment safer.

SECTION 4 RANKING

4.1 Global Rank [out of 47,824 stocks] and Rank in the Europe Region [out of 8,439 stocks]

DescriptionValueGlobal RankIn Eur Region
MCap (US$)20.4B745190
Total Assets (US$)45.9B907227
Revenue (US$)56.1B17763
Net Profit (US$)(40M)40,4216,665
Return on Equity %0.727,0984,507
Net Profit Margin %0.127,5964,494
Price to Book5.427,4174,370
Yield %0.518,9603,236
PV$1000 (1Year) US$*97126,6195,001
US$* Change (1Year) %-6.126,5194,992

* 1 year ago GBP 1 = USD 1.23

Oct 20, 2017: GBP 1 equals USD 1.32

4.2 Independent Ratings

Tesco PLC is the 35th largest by revenue in the FT Global 500.

It is the 56th largest by revenue in the Forbes Global 2000.

It was ranked 330 by Newsweek and Corporate Knights Capital in the World's 500 Greenest Companies 2014. It had outstanding scores of 36.4% in Carbon productivity, 18.5% in Energy productivity and 10.1% in Reputation.

It is placed 994/1287 in BSS News Bites' ranking of United Kingdom performers in the past year, a percentile ranking of 23.

SECTION 5 TESCO FINANCIALS

5.1 Financials Summary

Year endedFeb 2017Feb 2016Feb 2015
Sales (USD B)56.15487.9
Pretax (USD)145M202M(9.8B)
Net (USD)(40M)138M(8.9B)
EPS (USD)(0.0049)0.0169(1.096)

Net profit slumped from US$138 million in 2016 to a loss of US$40 million in 2017. Earnings Per Share (EPS) fell from 1.69c to -0.49c.

5.2 Annual Report for the year ended February 25, 2017 (year-on-year comparisons with previous corresponding period)-

Favourable Changes:

+ Total revenue up 3.9% from $US54.0b to $US56.1b.

Unfavourable Changes:

+ EBIT Margin down from 2.0% to 1.8%.

+ EBIT to total assets down from 2.5% to 2.2%.

+ Administration expenses to Sales up from 3.4% to 3.6%.

+ Profit before tax to Sales down from 0.4% to 0.3%.

+ Total liabilities to Total assets up 7.5% from 0.8 to 0.9.

+ Retained earnings to total assets down from 7.4% to 0.7%.

+ Fixed Assets to Total Assets down from 40.8% to 39.5%.

+ Total Liabilities to EBITDA of 38.9 compares unfavourably with the Joseph Piotroski benchmark of <5. This ratio has deteriorated by 19% from the previous year's ratio of 32.7.

+ Total Liabilities to Operating Cash Flow of 19.9 compares unfavourably with the Joseph Piotroski benchmark of <4. This ratio has deteriorated by 19.9% from the previous year's ratio of 16.6.

+ Net tangible assets per share down 34.3% from $US0.7 to $US0.46.

Note:

+ Interest cover steady at 1.2.

+ Total revenue to total assets steady at 1.2.

+ Cost of Goods Sold to Sales up from 94.7% to 94.8%.

+ Tax expenses to Sales up from 0.1% to 0.2%.

+ Current ratio steady at 0.8.

+ Total non-current assets to Total Assets down from 66.6% to 66.4%.

+ Total current assets to Total Assets up from 33.4% to 33.6%.

+ Intangibles to Total Assets down from 6.5% to 5.9%.

+ Current Inventory to Total Assets down from 5.5% to 5%.

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (GBX)
20 Oct 20171

SECTION 6 TESCO PROFILE

6.1 Activities

Tesco PLC, together with its subsidiaries, operates as a grocery retailer. It operates stores that primarily offer food products, as well as general merchandise, clothing products, and electrical products. The company also provides telecom, retail banking, financial, and insurance services. In addition, it engages in data analysis, distribution, and property operations. Tesco PLC also sells its products through online and catalog. The company operates in the United Kingdom, China, the Czech Republic, Hungary, the Republic of Ireland, India, Japan, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey, and the United States. It operates approximately 5,000 stores. The company was formerly known as Tesco Stores (Holdings) Limited and changed its name to Tesco PLC in 1983. Tesco PLC was founded in 1919 and is based in Cheshunt, the United Kingdom.

6.2 Industry & Sector

Classification LevelName of Sector
Industry GroupFood & Drug Retailing
Economic SectorConsumer Non-Cyclicals
Business SectorFood & Drug Retailing

6.3 Top Management

The chief executive officer is Dave Lewis and the chief financial officer is Alan Stewart.

6.4 Issued Capital

Based on 8,188,836,904 issued shares the market capitalisation is GBP15.5 billion (US$20.4 billion).

SECTION 7 REPORTED BUYING AND SELLING

Insider Buying

October 09: Tesco director buys

Tesco (L:TSCO) director Adrian Morris bought 73 shares worth GBP138 ($US181) on October 06. The purchase price was GBP1.89.

October 09: Tesco director buys

Tesco (L:TSCO) director Alison Horner bought 16 shares worth GBP30 ($US40) on October 06. The purchase price was GBP1.89.

October 09: Tesco director buys

Tesco (L:TSCO) director Jason Tarry bought 74 shares worth GBP140 ($US183) on October 06. The purchase price was GBP1.89.

October 09: Tesco director buys

Tesco (L:TSCO) director Alan Stewart bought 74 shares worth GBP140 ($US183) on October 06. The purchase price was GBP1.89.

October 09: Tesco director buys

Tesco (L:TSCO) director Bernard Higgins bought 74 shares worth GBP140 ($US183) on October 06. The purchase price was GBP1.89.

SECTION 8 STOCK BUZZ

Corporate Wire

To view Recent Company Headlines, click here

October 16: Tesco: Tender Offer to Purchase Outstanding Notes

Tesco Corporate Treasury Services PLC (TCTS) announces today an invitation to holders of its outstanding EUR1,250,000,000 1.375 per cent. Notes due 2019 and guaranteed by Tesco (as defined below) (ISIN: XS1082970853) (the July 2019 Notes) and Tesco PLC (Tesco and, together with TCTS, the Offerors) announces today separate invitations to holders of its outstanding (a) Pound350,000,000 5.50 per cent.

October 13: Tesco: RULE 2.9 ANNOUNCEMENT - SECURITIES IN ISSUE

In accordance with Rule 2.9 of the Takeover Code, Tesco PLC (the "Company") hereby confirms that, as at 12 October 2017, it had 8,189,949,346 Ordinary Shares of 5 pence each in issue and admitted to trading on the London Stock Exchange and the Irish Stock Exchange. The Company currently holds no Ordinary Shares in treasury.

The Company's International Securities Identification Number ("ISIN") is GB0008847096.

The Company has an ADR programme.

October 06: Tesco announces dividend

Tesco today announced an interim dividend of GBX1.0 per share. The ex dividend date is Thursday, October 12, 2017 and it is payable on Friday, November 24.

October 04: Tesco: Block listing Interim Review

October 04: Tesco: Half-year Report

Contact: 44-1992-646484

Physical Address: PO Box 18, Cheshunt, Waltham Cross, EN8 9SL, United Kingdom

State/Province/Country: United Kingdom

Country of Incorporation: United Kingdom

Exchange: London Stock Exchange

ISIN: GB0008847096

L:TSCO; LON:TSCO; LN:TSCO; TSCO.L

PermID: 4295895258

Tesco Plc

Source: www.BuySellSignals.com