How Wm. Morrison Supermarkets plc Could Give You The Best Surprise Of Your Investing Life!

Even though shares in Wm. Morrison Supermarkets plc (LON: MRW) have had a rough ride, now could be a great time to buy

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.

morrisons

It’s been an incredibly difficult year for investors in Morrisons (LSE: MRW). Indeed, shares in the Bradford-based supermarket have fallen by 32% during the course of 2014, while the FTSE 100 has delivered a flat performance. Certainly, the supermarket sector is going through an extremely competitive and highly challenging period. However, there could be a lot of light at the end of the tunnel for holders of shares in Morrisons. Here’s why.

Growth Potential

Although earnings are forecast to fall by 52% in the current year, Morrisons is forecast to grow its bottom line by 18% next year. Certainly, profit will still be a lot lower in two years’ time than it is now, but the reasons for the bounce in profit next year could hold the key to the company’s longer-term future.

At present, Morrisons is significantly behind its main rivals when it comes to online shopping and convenience stores. Unlike Tesco and J Sainsbury, Morrisons has had absolutely no online presence until earlier this year, and still only delivers to a relatively small area. This has meant that the company has missed out on a fast-growing area for the last ten years, while the likes of Tesco and J Sainsbury are still reporting relatively strong sales growth in this space.

It’s a similar story with convenience stores. Morrisons had only a handful until a year ago. The company is now opening them at the rate of roughly one every week or two, which means that next year it should have a considerable portfolio of smaller stores with which to rival its peers. As with online shopping, convenience stores have proven to be a high-growth area, as people ‘top-up’ their weekly shop, which Morrisons has had no presence in.

An Improving Economic Outlook

At present, Morrisons is engaging in a price war with its rivals and is ‘reinvesting in pricing’, which hurts the bottom line in the short run. However, with the UK economy continuing its upward trajectory, Morrisons may not have to focus on discount retailers to such a great extent moving forward. That’s because, just as the habits of shoppers changed during the credit crunch, they could change again during a period of economic growth. In other words, the recession made many shoppers focus on price above all else, while low inflation and wage rises could help to shift their attention on to quality and service, which could provide a boost to Morrisons.

Looking Ahead

Certainly, investing in Morrisons is not without risk. The online and convenience stores could disappoint, while shoppers’ attitudes may take some time to change. However, with shares having fallen by 32% in the last eight months alone, the potential rewards seem to outweigh the possible risks. As such, Morrisons could deliver a positive surprise in future.

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.

Peter Stephens owns shares of Morrisons, Tesco and J Sainsbury. The Motley Fool UK owns shares in Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »