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How does Sainsbury’s share price compare to its rivals?

Following on from its failed takeover of Asda this year, Sainsbury’s (LSE: SBRY) has continued to see its share price come under pressure, seemingly struggling to convince investors that it has something to offer. Just today, the company announced that same-store-sales (excluding fuel) fell 1.6% in Q1, and warned that the clothing and general merchandise arenas are “uncertain and highly promotional”.

This had me thinking. I wonder if the current share price is actually a fair reflection of the company’s prospects, or just a hangover from the Competition and Markets Authority’s decision to block the Asda takeover? I decided to look at some of the fundamental numbers.

Price-to-earnings

Where better to start when assessing a share’s price than the grandfather of value metrics, the P/E ratio?

Considering today’s price and the latest earnings estimates, Sainsbury’s P/E currently stands at just 9.6. Comparing this to its listed rivals, Tesco and Morrisons, that have ratios of 13.6 and 14.8 respectively, this seems somewhat cheap. Tesco is seen to be generally performing well, with its shares up more than 20% so far this year, while Sainsbury’s price has fallen about 30% as views of it have remained negative.

Dividends

Always a consideration in my own investments, how much income shareholders can expect is my next metric.

Of the three companies, Sainsbury’s dividend yield of 5.5% comes in top — Morrisons yields 3.2% while Tesco’s is just 2.5%. I am always cautious of companies offering too-high dividends, though my personal opinion has always been that a yield in the 5% range is perhaps the top limit of what I consider reasonable.

It is also important to consider dividend growth – today’s number may be all well and good, after all, but is it going to last? On this front, Sainsbury’s comes in as middle of the road, but unfortunately this road is a negative one! Looking at five-year net dividend growth, Sainsbury’s has seen its dividend decline about 8.7%, while Morrisons saw declines of only 0.6% and Tesco has reduced dividends of by 17.1% per annum.

Book value

The last thing I will consider is the net asset value of the company – effectively what shareholders would own right now if the business were shut down (basically net assets per share). This number has a lot of flaws in terms of true valuation, but for comparison purposes it can offer some perspective.

This is another metric where Sainsbury’s seems to come top, currently holding about £3.80 per share in book value – far above its current share price of £1.97. If Tesco were wound-up, it would offer investors only £1.50 per share (current share price £2.30), while Morrisons would offer just £1.80 (current price £2.05).

Now, it isn’t as simple as just comparing these numbers to the share price, but that said, such a comparison is very interesting – of the three listed supermarkets here, Sainsbury’s is the only one worth more than its share price suggests purely based on how many assets it has. Taken in the context of its decent dividend yield and P/E ratio however, I think Sainsbury’s share price is probably low enough to excite my interest.

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Karl has no positions in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.