3 Things That Say J Sainsbury plc Is A Buy

J Sainsbury plc (LON: SBRY) is still a big favourite.

| 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.

Sainsbury'sThe supermarkets are having it tough right now, with post-recession belt-tightening and a price assault from Aldi and Lidl taking their toll.

Tesco is fighting hard to repair its reputation as the UK’s number one groceries seller, while Morrison is struggling to find its place. But what about J Sainsbury (LSE: SBRY)?

I think Sainsbury’s is in a very strong position. Here are three reasons why:

1. Identity

Sainsbury’s knows what it is and where it’s positioned in the market. It aims more towards the quality end of the market, but is accessible to most people, offering something a bit nicer than usual to ordinary folk.

And that strategy has been working well, with earnings per share (EPS) growing every year for the past five years. We do have a couple of years of stagnating earnings forecast, but that’s the same across the whole sector.

2. Recognition

Last year, Sainsbury’s was named Supermarket of the Year  at the Retail Industry Awards for the sixth time in eight years, Online Retailer of the Year at the Grocer Gold awards for the second consecutive year, and Convenience Retailer of the Year for the fourth consecutive year at the Retail Industry Awards.

At the QBE National Business Awards the company also picked up the FTSE100 Business of the Year 2013 title, and was granted a Gold Accreditation by Investors In People to become the only supermarket so honoured.

Sainsbury’s must be doing something right.

3. Fundamentals

While we do have a fall in EPS of 7% expected for the year ending March 2015, the market looks to have over-reacted — especially as the City is expecting 2016 to be flat. At 320p, Sainsbury’s shares are down 17% over the past 12 months, and that puts them on a forward P/E ratio for the next two years of under 11. Compare that to the FTSE 100 long-term average of 14, and that immediately commands attention.

And when you throw in dividends exceeding 5% with cover being maintained at around 1.8 times, Sainsbury’s shares just have to be too cheap.

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool owns shares in Tesco.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

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

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »