UK stock report - Tesco

UK

Tesco falls for a second consecutive day, a two-day fall of 2.0% January 19, 2018 16:30 GMT

NEWS BITES - EUROPE

Tesco PLC (L:TSCO), the largest Food & drug retailers company by market cap in the United Kingdom, has fallen GBX1.90 (0.9%) for a second consecutive day on Friday. This brought its two-day fall to GBX4.20 (2.0%), compared with the FTSE 100 Index which rose 5.4 points (0.1%) in the two days for a relative price change of -2.1%. Cumulative volume in the 2 days was 0.7 times the average 2-day volume of 28.7 million shares. The stock last traded at GBX207.80.

Highlights in today's Report:

SECTION 1 BEARISH SIGNALS

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

SECTION 2 BULLISH SIGNALS

Fundamentals, Technicals, High Performance Indicators

SECTION 3 PRICE VOLUME DYNAMICS

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

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, 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 BEARISH SIGNALS

1.1 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 2.8% is 17.2%. 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. Also, this has deteriorated from 2.9% last year.

Du Pont AnalysisROEProfit MarginAsset TurnoverEquity Multiplier
Current Year0.70.11.27.1
Previous Year2.90.51.25.1

1.2 Overvaluation [compared with sector average]:

+ Price to Book of 6.3 [3.3].

+ Return on Equity 0.7% [5.5%].

+ Return on Capital Employed 3.9% [5.9%].

+ Dividend yield of 0.5% [1.9%].

1.3 Low Performance Indicators:

DescriptionValueRank In Market
Return on Assets [ROA] %0.1In Bottom 1%
EBITDA Margin %1.8In Bottom 5%
Total Debt to Equity1.5In Bottom Quartile
Return on Capital Employed [ROCE] %3.9In Bottom Quartile
Price Change %-0.9In Bottom Quartile

SECTION 2 TESCO BULLISH SIGNALS

2.1 Fundamentals:

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.5. Compared with the rest of the market the stock is undervalued.

+ 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-

2.2 Technicals:

+ The price increased 1.4% in the last week and 0.9% in the last month.

+ The 4.3% discount to 12-month high of GBX217.10 against the 26.4% premium to 12-month low of GBX164.47 suggests the stock continues to push for new highs.

+ In the last three months the stock has hit a new 52-week high twice.

+ The present value of GBP1,000 (PV1000) invested twenty years ago in Tesco is GBP1,805, including a capital gain of GBP614 and dividend reinvested of GBP191.

+ 20 years Multiplier in GBP = 1.805x

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

Jan 19, 2018: GBP 1 equals USD 1.39

2.3 High Performance Indicators:

DescriptionValueRank In Market
Today's TurnoverGBP49.8 million (US$69.2 million)In Top 2%
Price to Sales0.4In Top Quartile
Price/MAP2001.13In Top Quartile
Price/MAP501.04In Top Quartile

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Technicals:

+ Volume: there were 23,956,269 shares worth GBP49.8 million (US$69.2 million) traded today. In the past week, volume was 0.9 times average and the shares were up 1.4%. The volume was 0.8 times the average daily trading volume of 28.7 million shares.

+ The present value of GBP1,000 (PV1000) invested one year ago in Tesco is GBP1,037, comprising a capital gain of GBP31 and dividend reinvested of GBP6.

PV10001-week1-month1-year
TSCO.L1,0141,0091,037
FTSE 100 Index9941,0141,072

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 3 of the last 5 years. An investment a year ago in TSCO would have produced a return of 3.6%.

TSCOClose (GBX)Dividends (GBX)Capital Gain / (Loss) %% YieldAnnual Return %
Jan 19207.813.10.53.6
1 Yr ago201.52-25.4-25.4
2 Yrs ago160.69-(26.2)-(26.2)
3 Yrs ago217.8811.29(31.1)3.6(27.5)
4 Yrs ago316.1616.4(1.1)5.14.0

Close 5 years ago GBX319.84

3.3 Beta & Alpha:

+ Beta: the Beta of Tesco stock is 0.8. A Beta lower than 1 suggests this is a low risk, low return stock with volatility less than that of the market.

+ Alpha: the Alpha of the stock is -5.4. The actual return of -0.02% fell short of the expected return of 5.4%, reflecting underperformance.

3.4 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 79.8% (or a turnover period of 1 year 3 months). This average length of ownership of the stock at 62.5 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 47,420 stocks] and Rank in the Europe Region [out of 8,522 stocks]

DescriptionValueGlobal RankIn Eur Region
MCap (US$)23.7B658166
Total Assets (US$)45.9B929241
Revenue (US$)56.1B18267
Net Profit (US$)(40M)40,4266,680
Return on Equity %0.727,4384,538
Net Profit Margin %0.127,8564,478
Price to Book6.429,2154,344
Yield %0.519,5393,460
PV$1000 (1Year) US$*1,16418,4644,016
US$* Change (1Year) %16.618,7704,065

* 1 year ago GBP 1 = USD 1.23

Jan 19, 2018: GBP 1 equals USD 1.39

4.2 Independent Ratings

+ FT 500:

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

+ Fortune 500:

It was ranked 92 by total revenues in the Fortune 500 annual list for 2017; a deterioration over a year from rank 72 in 2016.

+ Forbes 2000:

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

+ BSS/News Bites:

It is placed 807/1306 in BSS News Bites' ranking of United Kingdom performers in the past year, a percentile ranking of 39.

+ Vanguard Total World Stock ETF 7457:

The stock was one of 7457 global stocks selected by Vanguard Total World Stock ETF (VT). As at November 30, 2017, the Vanguard Total World Stock ETF held 2,271,907 shares worth $US5,676,807 or 0.04% by value of the ETF's portfolio [Ranked 451 out of 7457 by value and 29 out of 303 for United Kingdom].

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 Trailing 12 Months Dividends

Trailing 12 Months ToValue (GBX)
19 Jan 20181

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
Economic SectorConsumer Non-Cyclicals
Business SectorFood & Drug Retailing
Industry GroupFood & 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 8,191,331,817 issued shares the market capitalisation is GBP17 billion (US$23.7 billion).

SECTION 7 REPORTED BUYING AND SELLING

Insider Buying

January 02: Tesco director buys

Tesco (L:TSCO) director Alison Horner bought 14 shares worth GBP29 ($US39) on December 29, 2017. The purchase price was GBP2.09.

January 02: Tesco director buys

Tesco (L:TSCO) director Adrian Morris bought 67 shares worth GBP140 ($US189) on December 29, 2017. The purchase price was GBP2.09.

January 02: Tesco director buys

Tesco (L:TSCO) director Bernard Higgins bought 66 shares worth GBP138 ($US186) on December 29, 2017. The purchase price was GBP2.09.

January 02: Tesco director buys

Tesco (L:TSCO) director Jason Tarry bought 66 shares worth GBP138 ($US186) on December 29, 2017. The purchase price was GBP2.09.

January 02: Tesco director buys

Tesco (L:TSCO) director Alan Stewart bought 66 shares worth GBP138 ($US186) on December 29, 2017. The purchase price was GBP2.09.

SECTION 8 STOCK BUZZ

Corporate Wire

To view Recent Company Headlines, click here

January 19: TESCO: RULE 2.9 ANNOUNCEMENT - SECURITIES IN ISSUE

TESCO PLC - RULE 2.9 ANNOUNCEMENT - RELEVANT SECURITIES IN ISSUE

In accordance with Rule 2.9 of the Takeover Code, Tesco PLC (the "Company") hereby confirms that, as at 18 January 2018, it had 8,191,665,572 Ordinary Shares of 5 pence each in issue and admitted to trading on the London Stock Exchange and the Irish Stock Exchange.

January 19: TESCO: RULE 2.9 ANNOUNCEMENT - SECURITIES IN ISSUE

TESCO PLC - RULE 2.9 ANNOUNCEMENT - RELEVANT SECURITIES IN ISSUE

In accordance with Rule 2.9 of the Takeover Code, Tesco PLC (the "Company") hereby confirms that, as at 18 January 2018, it had 8,191,665,572 Ordinary Shares of 5 pence each in issue and admitted to trading on the London Stock Exchange and the Irish Stock Exchange.

January 12: 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 11 January 2018, it had 8,191,611,358 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.

January 11: Tesco: 3Q and Christmas Trading Statement 17/18

3Q and Christmas Trading Statement 17/18

FRESH FOOD DRIVES STRONG THIRD QUARTER & RECORD CHRISTMAS AT TESCO

Headlines (19 weeks ended 6 January 2018)

Strong third quarter performance in the UK and ROI, with like-for-like sales up 2.3%

o Continued UK market outperformance in like-for-like sales and volumes, particularly in fresh food

January 05: 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 4 January 2018, it had 8,191,414,776 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.

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