Picture supply: M&S Group plc
Figuring out doubtlessly undervalued shares is the key to worthwhile investing. Certainly, this has been the method of lots of the world’s most profitable buyers. And by specializing in an organization’s fundamentals like its aggressive place and steadiness sheet energy, it’s doable to establish alternatives that others may overlook.
Nevertheless, based mostly on Marks & Spencer’s (LSE:MKS) earnings over the previous yr, the retailer is the costliest inventory on the FTSE 100. Absolutely not? Let’s take a better look.
Crunching the numbers
In the course of the 52 weeks to 27 September 2025, the British icon reported primary earnings per share (EPS) of 0.9p. With a share value of just below 382p as I write on 11 February, it means the inventory’s buying and selling on an eye-watering 424 instances earnings. This places it comfortably on the high of the league desk of the FTSE 100’s price-to-earnings (P/E) ratios. By anybody’s requirements, that is extremely costly.
Nevertheless, over this era, M&S suffered a devastating cyberattack, from which it nonetheless hasn’t totally recovered. This resulted in distinctive prices — estimated to be within the area of £140m – being incurred. On high of this, there was a lack of income (and revenue) as its web site was unavailable for weeks.
Additionally, from 29 March 2025 to 27 September 2025, web debt elevated from £1.79bn to £2.53bn. Having mentioned that, the group remained in a web money place on the finish of this era when lease liabilities are eliminated.
For apparent causes, corporations choose to report adjusted earnings that take away the influence of those (hopefully) one-off occasions. Doing this provides a revised EPS of 23.8p and P/E ratio of 16. Immediately, the British retailer appears to be like to be a way more engaging prospect.
That’s in all probability why analysts have a 12-month share value goal that’s 15% increased than at the moment’s worth. Berenberg says the inventory trades on simply 10 instances its March 2027 forecast earnings. And resulting from its money movement potential, the financial institution’s anticipating that M&S might be ready to enhance its dividend yield to three%-4%. Nevertheless, this appears bold to me on condition that the historic (trailing 12 months) return is 0.9%.
Persistence is vital
However I think will probably be some time earlier than investor confidence is totally restored, despite the fact that I’m sure that the group’s now in a greater place to face up to one other cyber assault. M&S’s standing as a much-loved British establishment — and its profitable efforts to shed its picture as a vendor of frumpy clothes — has seen consumers return.
The group reported a file variety of prospects over the Christmas season. Its boss mentioned: “Food sales were strong, and the business continues to outperform, hitting a new market share milestone in the period.” Encouragingly, he added: “Fashion, home and beauty is getting back on track as we work through the tail end of recovery.”
The meals aspect of the enterprise continues to be the star performer. And to benefit from weight-loss medicine resulting in smaller appetites, it’s launched a ‘Nutrient Dense’ vary. Additionally, its 50:50 three way partnership with Ocado, is doing very properly. It’s presently the fastest-growing grocer within the UK.
On reflection, I don’t assume Marks & Spencer is essentially the most overvalued FTSE 100 inventory. In contrast, I reckon it could possibly be one in all its greatest bargains. For that reason, I feel it’s a restoration inventory for long-term buyers to contemplate.
