Is There Still Time To Buy J Sainsbury plc?

Can J Sainsbury plc (LON: SBRY) move higher, or are the company’s shares overvalued?

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Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at J Sainsbury (LSE: SBRY) to ascertain if its share price has the potential to push higher.

Current market sentiment
SBRY

The best place to start assessing whether or not Sainsbury’s share price has the potential to push higher, is to take a look at the market’s current opinion towards the company.

Unfortunately at present, it would appear that the market is somewhat doubtful of Sainsbury’s future, as the company’s sales, after nine consecutive years of growth, declined 1.5% during the 10 weeks to 15 March.  

This surprise decline in sales shocked investors and many market participants now believe that the company’s troubles will only get worse. 

Indeed, bets against Sainsbury’s have risen to the highest in record during recent weeks, with more than 16% of the company’s shares loaned out short sellers, who are betting that the shares will decline. Sainsbury’s is now the most shorted stock in the FTSE 100.

Still, it’s not all bad news. Sainsbury’s market share remained constant at 17% of the UK grocery market for the 10 weeks to 15 March. In comparison, Sainsbury’s main peers, Tesco and Morrisons both reported a decline in market share for the period.

Further, Sainsbury’s remains proactive in expanding the company’s presence around UK. The company opened approximately one million square feet of new space during 2013, in line with its target. In total, the company opened 13 new supermarkets, 91 convenience stores and six extensions during the year. 

Upcoming catalysts

Nevertheless, it is likely that the market’s view of Sainsbury’s will remain negative for some time, unless the company can return to growth. Sadly, this also implies that Sainsbury’s share price is likely to remain depressed unless the company reports a surprise sales jump.

That being said, Qatar Holdings still holds a major stake of the retailer and with Sainsbury’s shares at a low not seen since 2012, Qatar could make a low-ball takeover bid.

Valuation

For value investors, however, Sainsbury’s shares do look attractive on a valuation basis. In particular, the company’s current market capitalisation is approximately of £6bn, although Sainsbury’s freehold property is booked on the company’s balance sheet as being worth £10bn.  

What’s more, Sainsbury’s is cheap based on other metrics. Indeed, the company currently trades at a forward P/E of 10 and offers a dividend yield of 5.2%.

Foolish summary

Overall, on a valuation basis, I feel that there is still time to buy Sainsbury’s. 

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.

Rupert owns shares in Tesco and Morrisons. The Motley Fool has recommended shares in Morrisons and owns shares in Tesco.

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