Marks and Spencer (LSE:MKS) shares have more than doubled in value since sinking to a 52-week low in October 2022. This multichannel retailer has operations that span high-quality food, clothing, and home products. It’s been one of the top performing FTSE 250 stocks this year to date.
I don’t own shares in the business, but if I’d invested £1,000 five years ago, what would I have today?
Let’s crunch the numbers.
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Five-year performance
As I write, the Marks and Spencer share price stands at 187.94p. Despite an excellent performance this year, the stock is still considerably below where it was five years ago. Back in 2018, the shares were changing hands for 282.24p.
With a spare £1k to invest in the company, I could have bought 354 shares five years ago, leaving 87p as spare change. Today, my shareholding would have diminished in value to £665.31. That’s a disappointing 33% loss over the time period.
However, that’s not the whole story. Marks and Spencer used to be a dividend stock before it suspended payouts to protect its finances during the pandemic. The group has announced plans to restore the dividend at its interim results, due on 8 November.
Once passive income is added to the equation, my total return would have increased by £63.01, giving me £728.32 today.
A FTSE 100 promotion?
Marks and Spencer enjoyed an unbroken 35-year stint in the FTSE 100 index until it was relegated to the mid-cap FTSE 250 in 2019. Several analysts are tipping the stock for a return to the UK’s blue-chip benchmark in the near future.
At today’s market capitalisation of £3.7bn, the 139-year-old retailer is the fifth-largest firm in the FTSE 250. A strong set of recent results suggest the company’s growth outlook could be bright.
In the financial year to 1 April, the group delivered a 9.6% increase in revenue to £11.9bn, a 21.4% hike in pre-tax profit to £475.7m, and a 15.4% reduction in net debt, to £355.6m. Both food and clothing sales show positive momentum and the company’s premium positioning is increasingly cementing the brand’s association with quality in the minds of consumers.
However, operating margins are tight, which overshadows the growth story somewhat. These won’t be easy for the business to improve in the current macroeconomic climate. Rising costs pressures from sky-high inflation, squeezed household budgets, and increasing government scrutiny on supermarkets’ pricing structures are all challenges the company has to contend with.
Should investors buy?
If investors are considering adding Marks and Spencer shares to their portfolios, there’s a good case to be made that the price is relatively cheap today — even after a 48% gain in 2023 so far.
The company trades for a price-to-earnings ratio of around 10.5, which is considerably lower than FTSE 100 rivals like Tesco (25.4) and Sainsbury’s (29.9). Plus, the anticipated resumption of dividends adds to the investment appeal.
That said, the cost-of-living crisis remains a major headwind for future share price growth. Investors would be wise to expect volatility over the coming months.
Overall, I think the stock looks attractively valued. If I have spare cash, I’m strongly considering buying Marks and Spencer shares when the time comes for me to rebalance my stock market portfolio.
