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Can Wm. Morrison Supermarkets plc’s Share Price Return To 328p?

Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to return to historic highs.

Today I’m looking at Morrisons’(LSE: MRW)(NASDAQOTH: MRWSY.US) to ascertain if its share price can return to 328p.

Initial catalyst

However, before we can figure out whether or not Morrisons can return to its all-time high of 328p, we need to establish what caused the share price to reach this level in the first place.

It would appear that Morrisons reached this high at the beginning of 2007, amid a broader sector rally and after the company reported it first set of positive results after acquiring smaller peer Safeway.

Unfortunately, Morrisons’ acquisition of Safeway during 2006 caused some problems for the country’s fourth largest supermarket chain. As a result, the retailer was forced to take a near £400 million charge relating to the acquisition.

In particular, Morrisons’ reported earnings per share of 9.3p for full-year 2007, compared to a loss of 9p per share for 2006. Still, 2007 was Morrisons’ most profitable year to date, and investors were pleased with the results pushing the company’s shares up to 328p. 

But can Morrisons return to its former glory?

Nearly seven years on and it would appear that Morrisons has fallen out of favour with investors. Indeed, despite Morrisons reporting earnings per share of 27p for 2013, 190% higher than the figure reported for 2007, Morrisons’ shares currently trade at both a lower share price and lower valuation.   

In particular, back during 2007 investors were impressed by the company’s prospects for growth, as a result the company traded at a historic P/E of 35. However, at present Morrisons only trades at a historic P/E of 9.7.

Unfortunately, this implies that investors have no confidence in Morrisons’ outlook as the company grapples with cut-throat competition within its sector. What’s more, Morrisons’ earnings growth has been glacial during the past few years and growth is unlikely to pick up any time soon.

Foolish summary

So overall, with such a slow rate of growth and competition within the general retailers sector intensifying, I feel that investors will continue to shun Morrisons. As a result, unless the company can drive growth through acquisitions or find other ways to improve profits I believe that Morrisons cannot return to 328p.

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In the meantime, please stay tuned for my next FTSE 100 verdict.

> Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in Morrisons.