At the time of writing Tesco (LON:TSCO) (TSCO.L) is trading at 185.5p after a sharp 1.17% fall on Monday. Is the biggest supermarket in the UK worth buying?
It is still at least an avoid for me. Tesco has opened a compensation scheme for 10,000 shareholders misled by a trading statement in 2014 which overstated the company’s profits. When you think of its wide UK geographical spread, with many huge stores all over, it is the company most at threat from Aldi and Lidl which continue to gain market share relentlessly.
When you are thinking about UK consumer shares a PE of 27.77 is far too high. The supermarket sector is a competitive even cutthroat business where profit margins are tight. There are plenty of people in the UK who cannot even afford to shop at Aldi and rely on foodbanks. There is no dividend yield either.
Sainsbury’s (LON:SBRY) (SBRY.L), a company which I used to be a shareholder of, is trading at 236.2p after a 0.51% rise on Monday. The PE is 10.78 and the dividend yield is 4.32%. Overall it is probably the strongest supermarket on current valuations. I would say at this price if you already hold the share do not sell, there could be a bit of profit here. I would rate it as a hold overall and if it reached the heady heights of 250p you could consider selling then.
Morrisons (LON:MRW) (MRW.L) is trading at 246.3p after a 0.89% fall on Monday. I have plenty of experience in shopping in this store but now mainly shop in Aldi. There are probably plenty of people like me in the north of England. Overall I would say avoid this share the PE is too high at 22.86 and the dividend yield is too low at 2.21%.
So toff supermarket SBRY is OK but seriously all over players will be hurt by the German operators. It's not fun shopping there but it's cheap and always busy.
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