LSE:MKS

Stock Analysis Report

Marks and Spencer Group

Executive Summary

Marks and Spencer Group plc operates various retail stores.

Rewards

Trading at 35.5% below its fair value

Earnings are forecast to grow 18.61% per year

Earnings grew by 217204.8% over the past year

Risk Analysis

Debt is not well covered by operating cash flow

Dividend of 7.51% is not well covered by earnings

Large one-off items impacting financial results

Shareholders have been diluted in the past year



Snowflake Analysis

Fair value with acceptable track record.


Similar Companies

Share Price & News

How has Marks and Spencer Group's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: MKS has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

3.7%

MKS

1.0%

GB Multiline Retail

0.2%

GB Market


1 Year Return

-34.9%

MKS

11.9%

GB Multiline Retail

12.3%

GB Market

Return vs Industry: MKS underperformed the UK Multiline Retail industry which returned 14% over the past year.

Return vs Market: MKS underperformed the UK Market which returned 12.7% over the past year.


Shareholder returns

MKSIndustryMarket
7 Day3.7%1.0%0.2%
30 Day-13.5%-4.3%1.1%
90 Day2.0%4.2%7.2%
1 Year-28.3%-34.9%17.9%11.9%18.2%12.3%
3 Year-32.1%-45.2%29.7%11.6%23.2%7.5%
5 Year-46.3%-60.7%-4.5%-24.9%41.7%9.0%

Price Volatility Vs. Market

How volatile is Marks and Spencer Group's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Marks and Spencer Group undervalued compared to its fair value and its price relative to the market?

34.2%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: MKS (£1.85) is trading below our estimate of fair value (£2.87)

Significantly Below Fair Value: MKS is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: MKS is poor value based on its PE Ratio (36.7x) compared to the Multiline Retail industry average (23.5x).

PE vs Market: MKS is poor value based on its PE Ratio (36.7x) compared to the UK market (18.5x).


Price to Earnings Growth Ratio

PEG Ratio: MKS is poor value based on its PEG Ratio (2x)


Price to Book Ratio

PB vs Industry: MKS is good value based on its PB Ratio (1.1x) compared to the XE Multiline Retail industry average (3.2x).


Next Steps

Future Growth

How is Marks and Spencer Group forecast to perform in the next 1 to 3 years based on estimates from 20 analysts?

18.6%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: MKS's forecast earnings growth (18.6% per year) is above the savings rate (0.5%).

Earnings vs Market: MKS's earnings (18.6% per year) are forecast to grow faster than the UK market (11.7% per year).

High Growth Earnings: MKS's earnings are forecast to grow, but not significantly.

Revenue vs Market: MKS's revenue is expected to decline over the next 3 years (-0.3% per year).

High Growth Revenue: MKS's revenue is forecast to decline over the next 3 years (-0.3% per year).


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: MKS's Return on Equity is forecast to be low in 3 years time (13.2%).


Next Steps

Past Performance

How has Marks and Spencer Group performed over the past 5 years?

-50.3%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: MKS has a large one-off loss of £373.4M impacting its September 28 2019 financial results.

Growing Profit Margin: MKS's current net profit margins (0.9%) are higher than last year (0%).


Past Earnings Growth Analysis

Earnings Trend: MKS's earnings have declined by -50.3% per year over the past 5 years.

Accelerating Growth: MKS's earnings growth over the past year (217204.8%) exceeds its 5-year average (-50.3% per year).

Earnings vs Industry: MKS earnings growth over the past year (217204.8%) exceeded the Multiline Retail industry -1.6%.


Return on Equity

High ROE: MKS's Return on Equity (3%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Marks and Spencer Group's financial position?


Financial Position Analysis

Short Term Liabilities: MKS's short term assets (£1.7B) do not cover its short term liabilities (£2.3B).

Long Term Liabilities: MKS's short term assets (£1.7B) do not cover its long term liabilities (£4.4B).


Debt to Equity History and Analysis

Debt Level: MKS's debt to equity ratio (143.7%) is considered high.

Reducing Debt: MKS's debt to equity ratio has increased from 80.3% to 143.7% over the past 5 years.

Debt Coverage: MKS's debt is not well covered by operating cash flow (16.1%).

Interest Coverage: MKS's interest payments on its debt are well covered by EBIT (8.8x coverage).


Balance Sheet

Inventory Level: MKS has a high level of physical assets or inventory.

Debt Coverage by Assets: MKS's debt is not covered by short term assets (assets are 0.4x debt).


Next Steps

Dividend

What is Marks and Spencer Group's current dividend yield, its reliability and sustainability?

7.41%

Current Dividend Yield


Dividend Yield vs Market

company7.4%marketbottom25%1.8%markettop25%5.0%industryaverage3.5%forecastin3Years5.8%

Current dividend yield vs market & industry

Notable Dividend: MKS's dividend (7.51%) is higher than the bottom 25% of dividend payers in the UK market (1.83%).

High Dividend: MKS's dividend (7.51%) is in the top 25% of dividend payers in the UK market (4.95%)


Stability and Growth of Payments

Stable Dividend: MKS's dividend payments have been volatile in the past 10 years.

Growing Dividend: MKS's dividend payments have fallen over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (218%), MKS's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: MKS's dividends in 3 years are forecast to be covered by earnings (62.2% payout ratio).


Next Steps

Management

What is the CEO of Marks and Spencer Group's salary, the management and board of directors tenure and is there insider trading?

1.5yrs

Average management tenure


CEO

Steve Rowe (51yo)

3.8yrs

Tenure

UK£1,667,000

Compensation

Mr. Steve Rowe has been the Chief Executive Officer of Marks and Spencer Group plc since April 2, 2016 and as its Executive Director since October 1, 2012. Mr. Rowe has extensive experience across all part ...


CEO Compensation Analysis

Compensation vs Market: Steve's total compensation ($USD2.17M) is about average for companies of similar size in the UK market ($USD2.25M).

Compensation vs Earnings: Steve's compensation has increased by more than 20% in the past year.


Management Age and Tenure

1.5yrs

Average Tenure

51yo

Average Age

Experienced Management: MKS's management team is not considered experienced ( 1.5 years average tenure), which suggests a new team.


Board Age and Tenure

1.9yrs

Average Tenure

55yo

Average Age

Experienced Board: MKS's board of directors are not considered experienced ( 1.9 years average tenure), which suggests a new board.


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

BuyUK£99,27526 Sep 19
Archie Norman
EntityIndividual
Role
Chairman of the Board
Non-Executive Chairman
Shares55,000
Max PriceUK£1.81
BuyUK£4,99022 May 19
Katie Bickerstaffe
EntityIndividual
Role
Member of the Board of Directors
Non-Executive Director
Shares2,000
Max PriceUK£2.50

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 6.7%.


Management Team

  • Nick Folland (54yo)

    Group General Counsel & Company Secretary

    • Tenure: 0.9yrs
  • Steve Rowe (51yo)

    CEO & Executive Director

    • Tenure: 3.8yrs
    • Compensation: UK£1.67m
  • Fraser Ramzan

    Head of Investor Relations

    • Tenure: 3.6yrs
  • Stuart Machin (49yo)

    Managing Director of Food

    • Tenure: 1.8yrs
  • Sacha Berendji

    Retail, Operations & Property Director

    • James Munson

      Managing Director of Indian Operaions

      • Tenure: 2.7yrs
    • David Surdeau

      Interim Chief Financial Officer

      • Victoria McKenzie-Gould

        Director of Corporate Communications

        • Tenure: 1yrs
      • Craig Taylor

        Head of Operations for Food Supply Chain

        • Tenure: 1.3yrs
      • Harriet Hounsell

        Human Resource Director

        • Tenure: 0.3yrs

      Board Members

      • Andy Halford (60yo)

        Senior Independent Director

        • Tenure: 1.3yrs
        • Compensation: UK£93.00k
      • Archie Norman (65yo)

        Non-Executive Chairman

        • Tenure: 2.3yrs
        • Compensation: UK£600.00k
      • Justin King (57yo)

        Non-Executive Director

        • Tenure: 1yrs
        • Compensation: UK£18.00k
      • Katie Bickerstaffe (52yo)

        Non-Executive Director

        • Tenure: 1.5yrs
        • Compensation: UK£51.00k
      • Steve Rowe (51yo)

        CEO & Executive Director

        • Tenure: 3.8yrs
        • Compensation: UK£1.67m
      • Andrew Fisher (48yo)

        Non-Executive Director

        • Tenure: 4.1yrs
        • Compensation: UK£78.00k
      • Alison Brittain (55yo)

        Independent Non-Executive Director

        • Tenure: 6yrs
        • Compensation: UK£70.00k
      • Pip McCrostie

        Non-Executive Director

        • Tenure: 1.5yrs
        • Compensation: UK£51.00k

      Company Information

      Marks and Spencer Group plc's company bio, employee growth, exchange listings and data sources


      Key Information

      • Name: Marks and Spencer Group plc
      • Ticker: MKS
      • Exchange: LSE
      • Founded: 1884
      • Industry: Department Stores
      • Sector: Retail
      • Market Cap: UK£3.653b
      • Shares outstanding: 1.95b
      • Website: https://corporate.marksandspencer.com

      Number of Employees


      Location

      • Marks and Spencer Group plc
      • Waterside House
      • 35 North Wharf Road
      • London
      • Greater London
      • W2 1NW
      • United Kingdom

      Listings

      TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
      MAKS.YOTCPK (Pink Sheets LLC)SPONSORED ADRUSUSDMar 2002
      MAKS.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDMar 2002
      MA6DB (Deutsche Boerse AG)YesOrdinary SharesDEEURMar 2002
      MKSLSE (London Stock Exchange)YesOrdinary SharesGBGBPMar 2002
      MKSLBATS-CHIXE (BATS 'Chi-X Europe')YesOrdinary SharesGBGBPMar 2002
      MKS NBMV (Bolsa Mexicana de Valores)YesOrdinary SharesMXMXNMar 2002

      Biography

      Marks and Spencer Group plc operates various retail stores. The company offers protein deli and dairy; produce; ambient and in-store bakery; meals dessert and frozen; and hospitality and ‘Food on the Move’ products. It also provides womenswear, menswear, lingerie, kids wear, and home products; and financial services, including credit cards, current accounts and savings products, insurances, and mortgages, as well as renewable energy services. In addition, the company invests in and develops real estate properties; and provides its products online. It also exports its products to Europe, the Middle East, and Asia. The company operates 1,035 stores in the United Kingdom and 428 stores internationally. Marks and Spencer Group plc was founded in 1884 and is headquartered in London, the United Kingdom. 


      Company Analysis and Financial Data Status

      All financial data provided by Standard & Poor's Capital IQ.
      DataLast Updated (UTC time)
      Company Analysis2020/01/22 20:52
      End of Day Share Price2020/01/22 00:00
      Earnings2019/09/28
      Annual Earnings2019/03/30


      Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.