Investors have punished Marks & Spencer’s share price over the past year due to the cost-of-living crisis. The market anticipated that the tougher macro environment, recession even, will reduce consumer spending.
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However, the market may be pricing in an overly negative scenario that is not justified by the price decline.
In its November trading update, the retailer anticipates profits to be north of £200 million (see below). This figure was reaffirmed by the January trading update. That said, MKS’s free cash flow is expected to be negative and may soak up some of these profits.
As to the question if M&S is overvalued or undervalued, in these turbulent times, the company can swing from overvaluation to undervaluation in a matter of months. At £2.8 billion in market cap, that figure sounds about right – although a 30% swing in valuation may happen in a blink of an eye.
Source: Marks & Spence plc
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
