The Motley Fool

Why the Marks and Spencer share price could be about to soar

Life in the UK retail segment has been challenging for some time. In fact, Marks and Spencer (LSE: MKS) has experienced its own unique difficulties for nearly two decades, but especially since the financial crisis began in 2007/08. In the last 10 years, consumer confidence has generally been low, wage growth has been weak and there has been a shift towards online retailing.

Now though, the company could offer investment appeal. Improving trading conditions and a refreshed strategy could make it worth buying alongside another cheap stock that reported encouraging results on Tuesday.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Recovery potential

While M&S has sought to make various changes to its strategy in recent years, its current plan appears to be sound. It involves a refocus on the fundamental aspects of the business, with the company seeking to put in place an improved website and a more efficient supply chain. Alongside this, it is rationalising its asset base, while also seeking to become more competitive in what remains a fast-moving retail space.

The company could be aided by falling inflation, which is now lower than wage growth, while consumer disposable incomes are due to remain positive in real terms over the next few years. As such, the pressure on the UK retail sector that has been felt in the last few years could ease to some degree in future.

Investment potential

With M&S having a price-to-earnings (P/E) ratio of around 12 and a dividend yield in excess of 6%, it seems to offer a wide margin of safety. Since dividends are covered 1.4 times by profit, they appear to be sustainable. Certainly, profit growth may be modest in the near term, with trading conditions still being tough. But with the prospect of a revised strategy and an improving outlook for consumers, the stock appears to have the capacity to deliver improved performance.

Encouraging outlook

Also offering scope for strong capital growth over the medium term is automotive retail group Marshall Motor Holdings (LSE: MMH). The company reported a solid performance in the first half of the year on Tuesday, with its underlying profit before tax expected to be marginally ahead of the record performance delivered in the same period of the prior year. This performance has been driven by tight cost control, the positive impact of the closure of six lossmaking sites and robust trading disciplines.

Looking ahead, there is considerable uncertainty surrounding the automotive industry. Economic challenges may lie ahead, while there remains confusion surrounding diesel products and possible new vehicle supply constraints. However, with a P/E ratio of 8 and a dividend yield of 4% that is covered 3.6 times by profit, the stock seems to have investment potential.

Certainly, Marshall Motor Holdings may endure a volatile period, with the resignation of its CFO adding to its uncertain outlook. But for long-term investors, it may deliver high returns in both a capital growth and income capacity.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.