Frasers Group (LSE:FRAS), the FTSE 250 owner of Sports Direct, still looks like a bit of a bargain to me. At the moment (25 September), the group has a share price of 725p, which is 10.7 times it adjusted earnings per share for the 52 weeks ended 27 April 2025 (FY25) of 67.5p. The price-to-earnings ratio for all 543 stocks on the FTSE All-Share index is currently around 17.
Fingers in many pies
However, Frasers has minority positions in a number of other retailers. Fortunately, they are easy to value as most of them are in listed companies. At the end of FY25, their market value was £959m. None of their earnings are included in the group’s accounts.
Since then, two have delisted. Removing these and adjusting for current market prices gives an updated valuation of £904m.
Deduct this from the group’s current market cap of £3.278bn and we can see that investors value Frasers’ trading businesses at £2.374bn. This is equivalent to 7.8 times its historic (FY25) earnings. That’s incredibly low when compared to the stock market as a whole, the FTSE 250 and the retail sector.
The share price has traded within a range of 534p-903p over the past 12 months.
A huge incentive
In FY23, the company’s chief executive Michael Murray was awarded £100m of share options. For these to vest, he had to successfully deliver the group’s strategy, achieve an adjusted profit before tax of at least £500m in a single financial year and – most importantly of all — get the share price to £15 by October 2025.
But he’s fallen short by around 775p a share.
That’s why, at the group’s annual general meeting held this week, those holding 91.84% of its shares (including Murray’s father-in-law, Mike Ashley, who owns approximately 73% of the group) approved a new deal. But this time, the price target has been dropped to £12.
For context, over the past five years, the highest the share price has been is 949p. The remuneration committee has described the current macroeconomic and political environment as “challenging” and believes the revised (lower) target is more realistic.
Final thoughts
To be honest, I find this a little disappointing. Don’t get me wrong, as a shareholder I’d be very happy if the group’s shares increased in value by 65% by 30 September 2030. But knocking £3 off the target gives the impression of lacking ambition. After all, over the past five years, the stock’s done better than this, rising by an impressive 112%.
Perhaps members of the group’s remuneration committee are concerned that a cash-strapped UK government might want to raise taxes again. With over 30,000 employees, the group was hit hard by the April increase in employer’s National Insurance.
Or maybe they believe newspaper reports that suggest the Chancellor’s considering shifting the burden of commercial rates away from smaller shops towards larger stores.
Alternatively, they might be worried about the UK’s economic prospects. Despite recent overseas expansion, Frasers still earns the majority of its revenue domestically.
But it doesn’t really matter — £12 or £15 would still be a great return for me. And regardless, I believe the group’s shares are attractively priced. That’s why I plan to hold on to mine and why other investors could consider adding some to their own portfolios.
