The Royal Mail share price has crashed since June! I’d buy now

The Royal Mail share price has collapsed by almost a third since peaking in early June. After this steep crash, I see hidden value in this FTSE 100 stock.

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Royal Mail (LSE: RMG) shares have had a tough time of late. Indeed, the Royal Mail share price has been the worst performer in the FTSE 100 recently. Over the past month, it sits in 101st place among Footsie stocks (the FTSE 100 has 101 stocks as one is dual-listed). It’s also down over three and six months. What next for this ailing stock?

The Royal Mail share price has dived

Let’s start with the good news. The Royal Mail share price has had a great 12 months. Over the past year, the stock has soared by more than two-thirds (68.5%) to 414.9p as I write. It’s also up almost a quarter (22.9%) in 2021. However, the shares have been in steady decline since the summer, when RMG neared its all-time closing high of 631p that it had on 11 May 2018.

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On 7 June, the Royal Mail share price hit its 2021 intra-day high of 613.8p. The next day, it hit this year’s closing high of 606.4p. A week earlier, I said that the group needed to make positive progress with several issues. Hence, with the share price then at 578.6p, I said that “I’d see RMG as no better than a hold for now”. Alas, the shares have plummeted since then. After closing at 606.4p on 8 June, it’s been downhill all the way for RMG. This widely held and popular stock is down 13.9% over one month, 22.1% over three months and 16.4% over six months. It’s also down 31.6% since its 8 June close. Ouch.

What next for RMG?

Then again, the past 19 months have been an outstanding time to own RMG stock. On 3 April 2020, the Royal Mail share price closed at 124.3p, down 80.3% from its record high in May 2018. Thus, the shares have more than tripled (+233.8%) from their 2020 low, valuing RMG at £4.2bn.

Having been founded in 1516 by Henry VIII, the Royal Mail is 505 years old. But being the UK’s universal postal service provider in this digital age hasn’t been easy for the group. In this smartphone age of instant messages and video calls, letter deliveries are slowly dying out. However, Royal Mail has benefited enormously from the growth of Amazon, online shopping and parcel delivery. But the firm faces stiff challenges from other fast-growing courier companies.

Since its flotation at 330p a share in October 2013, life hasn’t been easy for it. But after crashing almost a third since 8 June, I see value in this ‘boring’ business. Christmas is coming and already there are early indications of continued growth in online shopping and parcel deliveries. Today, RMG trades on a lowly price-to-earnings ratio of 6.7 and a bumper earnings yield of 14.9%. The dividend yield is 2.4% a year, which leaves room for growth.

I don’t own these shares today. But after their recent crash, I’d be a willing buyer at the current Royal Mail share price of 414.9p. I’d then cross my fingers and hope for exceptional profits for RMG from a ‘Santa boom’!

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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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