Tesco (LSE: TSCO) today announced another quarter of falling sales – it’s third quarter in a row – down 3.7%.
At today’s share price of 296p, Tesco’s PE Ratio is 24.
That makes Tesco stock too expensive to make an investment in.
It’s share price really needs to decline a lot further before it becomes a true bargain.
How much further?
Well all else being equal it’s 2003 lows of 162p a share would be nice.
But will it go that low?
It’s clear from the chart that the share price support (ooh a technical analysis term) at 3oop and reached a low of 280p on 11 April 2014.
A close below 280p could be what the market needs to really dump this stock.
If that occurs it may not necessarily go to 162p but would clearly be a bargain if it did.
So Dear Investors, Where Do We Stand?
Tesco’s immediate past is not good news and it’s immediate future looks pretty ropey as well:
We are pleased by the early response to our accelerated efforts to deliver the most compelling offer for customers. We expect this acceleration to continue to impact our headline performance throughout the coming quarters and for trading conditions to remain challenging for the UK grocery market as a whole
Philip Clarke, Chief Executive. Tesco Plc
In a nutshell, we have:
- An expensive large cap stock
- Declining sales
- Negative forward guidance
- Shrinking market share
These are ripe ingredients for an investment viewed from a value-orientated perspective.
But not today.
Keep this one on your watchlist folks 🙂
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Image: Chart From Yahoo! Finance