To date, 2022 has been a rough year for shareholders of universal postal services provider Royal Mail Group (LSE: RMG). Indeed, Royal Mail shares have shed 250p of their price so far this calendar year. What’s more, the stock hit a 52-week low just a week ago. So is Royal Mail a busted flush or ripe for recovery?
Royal Mail shares slide steeply
As I write on Wednesday afternoon, the Royal Mail share price stands at 270.5p. Almost a year ago, on
2 July 2021, the stock hit its 52-week high of 566.75p. In other words, it’s more than halved, down 52.3% from this peak. Yikes.
Here’s how the shares have performed over seven different timescales:
| One day | -3.8% |
| Five days | -0.2% |
| One month | -17.2% |
| Year to date | -46.6% |
| Six months | -47.7% |
| One year | -52.9% |
| Five years | -35.3% |
As you can see, this popular and widely held stock has fallen over all seven periods, ranging from one week to five years. I imagine these brutal declines have left Royal Mail shareholders feeling frustrated and concerned, especially those who also work for the group.
In another blow to its market standing, Royal Mail has been ejected from the blue-chip FTSE 100 index. With effect from Monday 20 June, the stock was relegated to the mid-cap FTSE 250 index. But when I buy into a listed company, I buy its entire future and not its recent past. So how do I feel about Royal Mail shares today?
Royal Mail’s fundamentals are in the bargain basement
At the current share price, here are the company’s current fundamentals:
| Share price | 270.5p |
| 52-week low (22 June 2022) | 258.8p |
| 52-week high (2 July 2021) | 566.75p |
| Market value | £2.6bn |
| Price-to-earnings ratio | 4.4 |
| Earnings yield | 22.5% |
| Dividend yield | 6.2% |
| Dividend cover | 3.6 |
Looking at these fundamentals, it seems to me that Royal Mail stock is practically priced for a major crisis. Its earnings yield of 22.5% is more than four times the FTSE 100’s earnings yield of 5.9%. But this is a trailing (backward-looking) measure — and the company is likely to face tougher times in 2022/23 than in 2021.
What’s more, the group’s dividend yield of 6.2% a year looks very attractive to me, as a veteran value investor always on the lookout for more passive income. This is nearly 1.6 times the Footsie’s cash yield of 3.9% a year, which I like the look of.
We’re buying while stocks last!
I worry about lots of issues at the moment, both national and global. Soaring consumer prices (notably oil and fuel) has fuelled red-hot inflation, causing a cost-of-living crisis. Interest rates are rising, making personal and corporate borrowing more expensive. Global growth is slowing, the risk of recession is rising, and there’s war in Ukraine.
Even so, I think all of these downsides are probably baked into the Royal Mail share price right now. For me, the shares are just too cheap today. That’s why I’ve asked my wife (who administers our family portfolio, because I hate admin) to buy Royal Mail shares ASAP. Of course, they may get even cheaper if the usual summer slump in share prices arrives — in which case, we’ll buy even more!
