The UK’s second-largest supermarket trades at a discount to book value and offers a 5% dividend.
Shares in J Sainsbury (LON:SBRY) have fallen by around 15% since the start of the year, but trading seems solid and Stockopedia’s algorithms rate this retailer as a Super Stock.
With full-year results due in April, I think it could be a good time to take a closer look at this business.
Summary
Pros:
Improved performance and market share
Asset-backed balance sheet, debt reduced
Good cash generation supports 5% yield
Cons:
This is a low-margin and highly-competitive sector
No specific targets for improved profitability
Has disappointed investors before
Profile
About the stock
J Sainsbury is a supermarket chain operating across the UK. It’s classified in the Consumer Defensives sector, within the Food & Drug Retailing industry group.
Sainsbury’s floated on the London market in 1973 and is now a member of the FTSE 100, with a market cap of £5.9bn and a recent share price of 248p.
The StockRanks show high scores in all three factors for Sainsbury, combining to give a high StockRank and style rating of Super Stock. This suggests Sainsbury’s could currently offer attractive quality and value metrics, with a positive outlook for earnings:
About the opportunity
Sainsbury’s has been performing well operationally, gaining volume share from rivals and strengthening its balance sheet.
Meanwhile, third and fourth-placed Asda and Morrisons have underperformed somewhat. Both are also under pressure from high debt loads following recent takeovers.
Sainsbury’s shares appear to be reasonably valued, trading close to book value and offering a useful 5% dividend yield. If the company can capitalise on the relative weakness of its key rivals and deliver a sustainable improvement in margins, I think this stock could benefit from a re-rating.
Business & Model
What is the company’s history and what does it do?
J Sainsbury was founded by John James and Mary Ann Sainsbury in 1869, with a single store on Drury Lane in London selling milk, eggs and butter.
Rising living standards in the capital at that time meant there…
Unlock the rest of this article with a 14 day trial
Already have an account?
Login here