The Royal Mail share price is up 158%! Should I buy the stock?

The Royal Mail share price could continue to rise in value as the company builds on the successes it’s had over the past 12 months.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Royal Mail (LSE: RMG) share price has jumped a staggering 158% over the past 12 months. This performance has erased much of the stock’s decline since its all-time high in May 2018. Back then, shares in the delivery group were changing hands at 631p. They fell to a low of 124p at the beginning of April 2020, before recovering rapidly to 450p today. 

As the company’s share price action over the past few years shows, the stock market can be a volatile and unpredictable place to invest. So, investing in the market certainly isn’t suitable for all. However, I’m comfortable with the level of uncertainty and volatility that comes with investing, and I’m interested in the Royal Mail share price after its recent performance. 

A change in fortunes

The first thing I do when I start taking a closer look at a business is try to understand how the organisation got to the position it’s in today. When it comes to Royal Mail, the company struggled for the past few years with declining letter volumes and rising costs. But the pandemic changed the group’s outlook entirely.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

With consumers confined to their homes, online retail has boomed, and Royal Mail has risen to the challenge. It’s hired thousands of new workers, introduced new specialist parcel post boxes, a new parcel pickup service, and changed the way consumers pay for parcels, so there’s no longer any need to visit a Post Office

These changes, coupled with the tailwind from the pandemic, have helped the firm reach new heights. Last week, the company said it expected full-year 2021 adjusted profit to be “well in excess” of £500m after a substantial rise in parcel revenues over the Christmas period. Group revenue for the nine months to December rose 20% to £9.3bn.

This is a terrific transformation for the group, which reported a net income of just £161m for its 2020 financial year. 

Royal Mail share price return

Looking at the above figures, it’s clear why the Royal Mail share price has performed so well over the past 12 months. If the company can keep this up, I think the stock could be an attractive acquisition at current levels. 

However, there’s no guarantee this boom will last. Parcel volumes have benefited from lockdowns. So, when the economy begins to open up again, it seems likely volumes will decline as consumers return to stores.

At the same time, the company has a history of poor relations with workers. It has also struggled to keep costs under control. All of these factors imply Royal Mail’s good fortune may not last. Other companies have also been growing their parcel businesses over the past 12 months. This suggests the group may face increased competition. 

Still, while the business does face challenges, I think the Royal Mail share price looks attractive. That’s why I’d buy the stock today. If the group can build on its success over the past year, I think it could see continued earnings growth. 

Should you buy Legal & General now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: February’s lower-risk, high-yield stock recommendation [PREMIUM PICKS]

Ice ideas will usually offer a steadier flow of income and is likely to be a slower-moving but more stable…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

4 powerful words from Warren Buffett!

Warren Buffett reckons that investors should never bet against the world's largest economy and its capacity for innovation over the…

Read more »

Investing Articles

2 high-yield shares that could generate £1,000 in passive income from a £20,000 investment

Considering building a passive income? Ken Hall has two high-yield financial services stocks that pay well above the Footsie average.

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s the 12-month price forecast for Barclays shares!

Barclays shares are tipped by City brokers to continue rising sharply. Does this make the FTSE 100 bank a no-brainer…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Is the easyJet share price looking cheap right now?

Our writer Ken Hall takes a look at the easyJet share price to see if it looks like good value…

Read more »

Investing Articles

Down 29%! Is this my chance to buy Tesla stock?

Tesla stock has lost over a quarter of its value since just before Christmas. Does this make it a Buy…

Read more »

Investing Articles

Up 33% in 2025! This growth machine is soaring in my Stocks and Shares ISA 

Ben McPoland shines a spotlight on one top-performing holding in his Stocks and Shares ISA portfolio. Why is it doing…

Read more »

Investing Articles

£10,000 invested in IAG shares 1 year ago is now worth…

IAG shares are among the FTSE 100’s best performers over 12 months, and I’m not surprised. This great firm stood…

Read more »