Over the past five years, the Royal Mail Group (LSE: RMG) share price has been riding a roller coaster. Alas, since January, this ride has been a steep plunge downwards. But after hefty price falls, are Royal Mail shares now in the bargain bin?
The Royal Mail share price’s tough 2022
So far, 2022 has been a painful year for long-suffering shareholders in Royal Mail, the UK’s universal postal provider. After a strong start to this calendar year, the Royal Mail share price has nosedived over the last few months. As a result, it is the 89th-worst performing share in the FTSE 100 index over the past three months.
At its 52-week high last summer, the Royal Mail share price briefly peaked at 613.8p on 8 June 2021. However, the shares then lost ground, ending 2021 at 506p. Early this year, RMG stock hit its 2022 intra-day high of 531.4p on 5 January. Alas, it’s all been downhill after this bright start.
As I write on Friday afternoon, the Royal Mail share price stands at 324.9p, down 12.2p (-3.6%) today. This leaves this Footsie stock just 2.4% above its 52-week low of 317.15p, hit on 6 April this year. Here’s how the RMG share price has performed over six different timescales:
| Five days | -7.3% |
| One month | -1.0% |
| Year to date | -35.9% |
| Six months | -25.1% |
| One year | -36.2% |
| Five years | -24.5% |
As you can see, the Royal Mail share price is down over all six time periods, including almost 36% in 2022 alone. But always remember that investors buy a company’s future and not its share price’s past. So is RMG stock is bargain-bin territory today?
I’d buy at this price
As a veteran value investor, Royal Mail’s company fundamentals look rather attractive to me today, following recent price falls. Here they are:
| Market value | Price-to-earnings | Earnings yield | Dividend yield | Dividend cover |
| £3.1bn | 3.7 | 26.8% | 5.1% | 522% |
It strikes me that little more than £3bn to buy the UK’s national postal provider — around since 1516 — is a modest price tag. What’s more, an earnings yield of almost 27% and a dividend yield above 5% a year look tasty to me, as an old-school value investor. Even better, this dividend is covered more than five times by earnings, making this cash pay-out appear rock-solid.
Of course, I could well be wrong and the company’s earnings might plummet in 2022/23, blowing up these fundamentals. Likewise, any surprises to the upside might send the Royal Mail share price racing upwards again.
To sum up, after the hammering Royal Mail shares have taken in 2022, they look far too cheap to me today. I don’t own RMG stock, but would happily buy at current price levels. Then I would sit back and collect my market-beating dividends, while waiting for this beaten-down share to recover!
