Tesco PLC & SSP Group PLC: Time To Buy, Sell Or Hold?

Are these 2 stocks appealing at the present time? Tesco PLC (LON: TSCO) and SSP Group PLC (LON: SSPG)

| 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.

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.

When all is said and done, investors in a company only ever have three options: buy, sell or hold. And, while making that decision may sound simple, doing so can be extremely challenging as the risks and potential rewards are weighed up in an investor’s mind.

For example, Tesco (LSE: TSCO) may appear to be a rather risky buy at the present time, with most investors seemingly being of the opinion that the country’s largest retail is a sell or, at the very least, a weak hold. That’s because it is enduring major internal and external problems in tandem which are causing its financial performance to come under severe pressure.

Regarding its internal problems, Tesco appears to have lost its direction since Sir Terry Leahy left the business as CEO in 2010. For example, it decided to diversify its operations and try its hand at a range of operations, such as film streaming and even selling used cars. This inevitably diverted focus away from its core operation of being a supermarket and, alongside the decision to exit the US market even after it had made a long term commitment to establishing itself there, caused the company to at least appear to lack direction.

In terms of external factors, the obvious one is the pressure which household budgets in the UK have been put under in recent years. Grocery shopping has gradually become all about price, discounts and bargains whereas when Tesco was in its pomp it was about value for money, trading up to its Finest range and the convenience of a large supermarket with free parking and decent customer service.

Both of these challenges, though, can be overcome. Tesco is becoming increasingly focused on its core operations and under its new management team is selling off surplus assets. In addition, UK wages are rising faster than inflation and, as history shows, once recessions are overcome people quickly return to old habits. As such, and with Tesco trading on a price to earnings growth (PEG) ratio of just 0.2, it seems to be a strong buy at the present time.

Similarly, food travel company SSP (LSE: SSP) also has great potential as an investment. Although it is expected to report a fall in net profit of 11% in the financial year recently ended, it is forecast to return to growth in the current year. In fact, its bottom line is due to rise by 16% in financial year 2016 which, alongside a price to earnings (P/E) ratio of 25.6, puts SSP on a PEG ratio of 1.6. This indicates that it has significant capital growth potential.

Additionally, SSP has a strong management team, with Kate Swann having delivered impressive financial performance in her previous role as CEO of WH Smith. And, as highlighted in its recent results, like-for-like sales have grown by 3% and operating margins have risen by 60 basis points due to the implementation of efficiency programmes. Therefore, now could be an opportune moment to buy a slice of the business for the long term.

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 Tesco. The Motley Fool UK owns shares of SSP Group. 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

Investing Articles

Here’s why I think the Vodafone share price should be 110% higher

Reflecting on speculation, our writer believes there’s a case to be made for the Vodafone share price being more than…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Is this dividend star also the best bargain in the FTSE 100?

This FTSE 100 stock pays a whopping 8%+ yield, looks very undervalued against its peers, and is set for stellar…

Read more »

Investing Articles

2 FTSE 100 stocks. One sublime, the other ridiculous

Our writer doesn’t understand the appeal of Ocado. But looking at the grocer’s latest results makes him see the attraction…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Down 18% in a year, what’s next for the Greatland Gold (GGP) share price?

The Greatland Gold share price has disappointed over the past 12 months. Our writer asks whether the company’s latest update…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

With 30% annual returns for a decade, I’m buying this for my Stocks & Shares ISA

Oliver Rodzianko has been looking for a new investment for his Stocks and Shares ISA. Here's one he's decided is…

Read more »

Investing Articles

These were the FTSE 100’s dogs and stars in February

The FTSE 100 limped along last month, but some Footsie shares soared while others slumped. Here are February's winners and…

Read more »

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

This £43bn of passive income is up for grabs today!

As a lover of passive income, I'm always on the lookout for extra cash. The good news is that these…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Is this my once-in-a-decade chance to buy these 2 beaten-down UK shares before they rocket?

The FTSE 100 has had a bumpy ride but these two UK shares have had it bumpier. Could now be…

Read more »