- The report highlighted that the company’s “limited non-food and banking exposure” was in the green when compared to its rivals.
- Morrison Supermarkets PLC earnings have surged 42.7 percent over the past year.
- This is due to surging demand driven by the coronavirus crisis.
Market analysts at Berenberg have upgraded WM Morrison Supermarkets PLC to a “buy” recommendation from “hold.” This is while noting an exceptional year for food retailers. The coronavirus crisis is set to increase food consumption and retail products. The report noted that its collaboration with Ocado and Amazon will allow it to expand its online offerings.
The bank also notes the firm’s price target from 200p to 213p. It also highlighted that the company’s “limited non-food and banking exposure” was in the green when compared to its rivals.
Austerity measures enacted by the UK government to curb the spread of coronavirus have cut short the growth trajectory of many businesses. The order requiring all restaurants and eateries has particularly affected many businesses in the sector.
UK mobility trends data shows an 82 percent drop in movement to restaurants, shopping centers, and cafes. One company, Morrison Supermarkets PLC, appears ready to power through the Covid-19 instigated crisis. It is also likely to recover quickly once the crisis is over due to an increase in sales and cash-flow.
The Company is in a Good Place
Morrison Supermarkets PLC earnings have surged 42.7 percent over the past year. The company also has a healthy Price to Earnings Ratio of 12.4. This is compared to the Consumer Retailing industry average of 16.2. This means that investors are reasonably confident about the future performance of the company.
Of course, there are other factors left out in PE calculations, and they include debt, cash flow, and assets. Morrison Supermarkets currently has an 87 percent freehold, and a 30 percent debt compared to its market capitalization. The mega-retailer additionally recorded a £394 operating profit at the end of the 2018/19 financial year.
The debt might be a bit of a con, but it is still manageable. With its shares trading at £1.81, the marker is at 39.7 percent below the estimated fair value of £3.
Morrison Supermarkets is Making Vital Adjustments
The supermarket group began a rapid expansion program in March. It hired an additional 3,500 workers to help scale operations at the height of intense buyer activity caused by lockdown uncertainty. March sales jumped by 5 percent as a result compared to a 1.7 percent decline in the year to February.
The company has been making adjustments in lockstep with emergent trends spurred by the epidemic. It recently joined forces with Deliveroo, an online food delivery company, to make deliveries to customers situated within a 2.5-mile radius from its stores. There are no surcharges for ordered items. The £4.99 fee is paid to Deliveroo for bike delivery unless the customer has a Deliveroo Plus service subscription.
Morrison Supermarkets’ annual growth has remained steady over the past five years at 50.3 percent. As such, its current share market price is most likely undervalued.