I like the look of the Tesco share price

Tesco is one of the most recognised names on the high street and this Fool thinks its share price could be well worth a closer look.

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Image source: Tesco plc

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Ah, Tesco (LSE:TSCO). The supermarket giant that’s as British as a cup of tea on a rainy day. But is this retail giant still a tasty morsel for my portfolio, or has it passed its sell-by date? Let’s roll up our sleeves and dig into the company and the Tesco share price to see what we can find.

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A giant of the sector

Tesco is everywhere in the UK. With a 27% market share, it’s the undisputed heavyweight champion of UK groceries. With over 100 years in operation, it’s been through more or less everything, from wars to pandemics. It’s built an impressive track record, despite issues like the overstated accounts scandal in the last decade.

But management isn’t resting on its laurels. It’s been flexing its digital muscles too. With a massive 40% of the UK’s online grocery market, the firm’s delivering more than just groceries – it’s delivering results. It’s as if it has found the secret aisle where it keeps the extra profits.

Should you invest £1,000 in Tesco right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco made the list?

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And its latest party trick is the new marketplace business. Tesco’s aiming to be the one-stop-shop for, well, everything. Need a banana, a birthday card and a bicycle? It’s got us covered.

Now, for the dividend devotees out there, the shares are serving up a mildly tempting 3.4% yield. It’s not quite a three-course meal, but it’s certainly more than a mere snack for income-hungry investors.

Sector challenges

But hold your horses (or should I say, hold your shopping trolleys?). It’s not all rosy in the aisles. The UK grocery market’s as crowded as the checkout lines on a Saturday morning. Discount rivals Aldi and Lidl are nipping at revenues like a pair of hungry terriers, and their expansion is accelerating.

And let’s face it, the UK economy isn’t exactly a picture of sunshine and rainbows right now. With consumers keeping a tighter grip on their wallets than a toddler with a chocolate bar, Tesco might find its profit margins squeezed.

Oh, and we can’t ignore the elephant in the room. With debts of £14.8bn, and a debt-to-equity ratio of 61.9% in an era of high interest rates, investors wouldn’t be blamed for having a few concerns.

One to watch

Tesco’s without doubt a giant of the sector with a long future ahead of it, but with the sector facing a number of challenges, the next few years clearly have some uncertainty.

On one hand, it’s clearly the big cheese of UK supermarkets. It’s got the kind of market dominance that makes other retailers green with envy. Its online game’s strong, and it’s not afraid to try new things. Plus, that dividend’s looking pretty tasty.

On the other hand, the competition’s fierce, the economy’s wobblier than a jelly in an earthquake, and that debt isn’t going to pay itself off.

So for the long-term investor who can stomach a bit of volatility, I like the idea of watching Tesco to see what’s next. It’s got the brand power, management experience and the adaptability to weather most storms, so I’ll be adding it to my watchlist for now.

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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.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco Plc. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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