12.3 Reasons That May Make Royal Mail Group plc A Buy

Royston Wild reveals why shares in Royal Mail Group plc (LON: RMG) look set to surge higher.

| 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.

Today I am outlining why I believe that Royal Mail Group (LSE: RMG) still offers great value for money for those seeking excellent earnings growth.

Primed to post steady earnings growth

Shares in Royal Mail have exploded since flotation back in mid-October, gaining more than 67% in little over a month from a launch price of 330p per share. Still, in my opinion the company is still a relatively cheap sector pick, and currently trades on a P/E multiple of 12.3 for the year ending March 2014.

To put this in perspective, the reading for Britain’s marque postal service is comfortably below a prospective average of 18.4 for its industrial transportation rivals. And the company’s multiple moves adjacent to the bang-for-your-buck benchmark of 10 for next year, at 10.9, underlying Royal Mail’s credentials as a great value pick.

Should you invest £1,000 in AstraZeneca 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 AstraZeneca made the list?

See the 6 stocks

Indeed, Royal Mail is expected by City number crunchers to punch earnings of 45p per share for 2014, an 8% on-year increase. Growth is then expected to hit double-digit territory the following year, with a 13% rise to 50.8p per share.

Of course, the horizon for Royal Mail is not exactly flawless, and the company still faces the prospect of crippling strike action in the near future. Planned industrial action for 4 November was called off after the Communication Workers Union (CWU) said that discussions over wages pensions and certain legal guarantees were making progress.

Still, Royal Mail has been subject to strikes in recent years, and the potential for fresh action is very much real, particularly given continuing ire over the firm’s privatisation.

But Royal Mail has a number of critical, and indeed earnings-busting, factors in its favour. Most notably, the firm has a stranglehold on the distribution of letters in the UK — what’s easier than slipping an envelope into the postbox at the end of the road, after all? — while it is also the largest single player on the domestic parcel market.

With the company having forked out billions of pounds in recent years to update its infrastructure, I believe that Royal Mail is in great shape to benefit from the inevitable rise in postal traffic in coming years.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

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.

> Royston does not own shares in Royal Mail Group.

More on Investing Articles

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »

Investing Articles

These FTSE shares may offer some safety as Trump slaps tariffs on trading partners

FTSE shares moved lower on 3 April, after US President Donald Trump introduced hefty tariffs on its trading partners. These…

Read more »

Investing Articles

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »

Elevated view over city of London skyline
Investing Articles

The M&G dividend yields over 10% — and could get higher!

Christopher Ruane explains why he's upbeat about the long-term outlook for the M&G dividend yield and would happily buy the…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

2 popular UK growth stocks I wouldn’t touch with a bargepole in today’s market

Buying growth stocks can deliver market-beating returns, but this FTSE 250 pair doesn't look like a convincing investment for our…

Read more »

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

10 FTSE shares falling today after President Trump’s tariffs bombshell!

Our writer explains why JD Sports Fashion from the FTSE 100 and a diverse bunch of other UK stocks are…

Read more »