There's better value elsewhere.
The snap judgement on Tesco (LSE: TSCO) seems to be a love-hate thing.
It's either Britain's biggest and best go-ahead supermarket chain successfully diversifying overseas and into other product areas to bring us many of the essentials for day to day life at a reasonable price, or it's the main culprit in the unwelcome homogenisation of the UK grocery shopping experience in its quest for growth at any price.
Whatever your view may be, the Tesco juggernaut is showing no sign of slowing just yet. In particular, Tuesday's interim management statement shows the supermarket making good inroads into the homogenisation of other countries' towns and cities.
Overseas excitement
Overseas sales provide the real excitement for Tesco lovers. In this area, growth was stronger increasing by 4.1% on the year helped by what the company sees as an improving global economy.
Perhaps most encouragingly of all for growth seekers, Tesco saw its biggest improvement across the pond, with 9.8% sales growth in the US on a like-for-like basis.
The other side of the world doesn't get off scot-free either. Tesco's sales in Asia were strong, with 23.4% growth thanks to shrewd investments made in new stores during the recession. In fact, Thailand is Tesco's largest national market with 663 outlets.
But it's the UK where Tesco feels most at home and which remains, by far, its most important market. Here, where it is the largest supermarket chain, Tesco generates around two-thirds of its sales and profits.
Its UK operations are closely watched as something of a barometer on the economy in the run-up to Christmas. The company is "continuing to see evidence of a steady consumer recovery" at home, but UK sales were up only slightly on a like-for-like sale basis, ignoring petrol sales and new store openings.
Britain's best-loved supermarket
But make no mistake, this is generally excellent progress by Britain's best-loved supermarket which is successfully waving the flag in various markets around the world. So maybe it deserves more of a growth rating than its two biggest UK-listed peers; Sainsbury (LSE: SBRY) and Morrison (LSE: MRW)?
If you believe in Tesco's brand and its prospects for further growth, then maybe it's appropriate to take your feelings into account when making investment decisions, as Peter Lynch would advocate. In other words -- it's not just about the figures.
But for some investors, it is only about the cold, hard numbers. And if it's purely the numbers you look at, then there's better value elsewhere for my money.
A year ago, I thought Sainsbury offered better value than Tesco. It turns out I was right. The problem is Sainsbury has done a fair bit of catching up, whilst Morrison has fallen behind a little.
The best UK-listed supermarket?
So which is the best value now? After all, many investors like to have at least some exposure to a major supermarket chain given their utility-like essential nature -- and a dividend yield a lot more attractive then the banks they all seem to have diworsified into.
On a price-to-earnings basis, Morrison still offers share shoppers the biggest discount at 10.7, followed by Tesco (11.5) and Sainsbury (13.3). For real assets, Sainsbury shades it ahead of Morrison -- with Tesco sitting on a far more optimistic rating.
For dividend hunters, meanwhile, Sainsbury is in first place with a prospective 4.6% yield, followed by Morrison at 3.8% and Tesco at 3.7%.
Overall, I'd say Sainsbury still has the edge, given the bottom-line figures, and potential for playing catch-up, but none of the big three offer absolutely compelling value.
At a wider level, there is better value elsewhere in the non-essential retail sector, if the UK recovery has truly set in. That's a tough call to make at the moment though, and Tesco's latest figures haven't shed quite enough light on the subject to pile in.
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