Tesco (LSE: TSCO) shares remain mighty popular with UK investors. A quick look at how they’ve performed in the last 12 months goes some way to justifying this.
Blast from the past
Let’s rewind the clock.
Back in July 2024, a new Labour government had just come to power. On the economic front, inflation had bounced slightly to 2.2%, having fallen to the Bank of England’s target of 2% in June. However, it was still markedly down from the 11% hit in October 2022.
Across the pond, Donald Trump had survived an assassination attempt and Joe Biden had removed himself from the 2024 Presidential race. We all know how that panned out.
At the time, Tesco shares were trading around 326p a pop.
Fast-forward to today and their value now sits at 429p — a price not seen for almost 15 years! Had anyone invested £10,000 back in July 2024, their stake would now be worth somewhere in the region of £13,100.
That’s impressive considering all the tariff-related turmoil we’ve witnessed in recent months.
Strong momentum
As well as being a great move on its own, Tesco’s 31% move easily outperforms the FTSE 100 in which the company features.
Catalysts for the former’s big share price gain include good, old-fashioned sales growth. For example, UK like-for-like sales rose 5.1% in the 13 weeks to May.
Despite having been the biggest UK supermarket by some margin for a very long time, Tesco has also managed to further increase its market share in the last 12 months.
But the good news doesn’t stop there. In addition to their lovely capital gain, holders will have received 13.7p per share in dividends!
Still worth considering?
Personally, I’d be surprised if Tesco matched this performance in the next 12 months.
A price-to-earnings (P/E) ratio of nearly 16 suggests a lot of good news is already priced in. In fact, this valuation is already significantly above the company’s average P/E of 11 over the last five years. It’s also now above the average price tag in the UK’s top tier.
Despite the aforementioned gain in market share, the £28bn cap still operates in a fiercely competitive space. With inflation on the rise again, I wouldn’t bet against the German bidget chains (Aldi and Lidl) continuing to make ground. It will be interesting to see whether Tesco’s margins begin to suffer if a price war intensifies.
Best of the bunch?
Then again, the defensive nature of this business suggests many investors will stick around. A forecast yield of 3.2% is in line with the average across the FTSE 100 too. In the absence of any shocking news, it looks like payouts will be safely covered by expected profit.
On top of this, I think the stock has a stronger investment case than Sainsbury‘s these days. Tesco’s main rival is currently the second most shorted stock on the UK market. Put another way, a significant minority of traders are betting its share price — up 10% in one year — could be about to fall.
Taking everything into account, I continue to think this is the best of the grocery retail bunch to consider. But expectations might need to be tempered.
