A solid FTSE 100 stock I’d buy in this market crash

I think this FTSE 100 stock is a bargain as a result of the recent stock market crash.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While the stock market crash has plunged global indices into the red by up to 30%, it has also thrown up some incredible bargains.

A plummet in share prices across the market is never an easy pill to swallow for investors. However, why not make the most of it and grab a bargain or two, while prices are at their lowest for years.

With that in mind, here’s a solid FTSE 100 company that I think looks cheap in this stock market crash.

Supermarket giant

With over 3,400 stores nationwide, Tesco (LSE: TSCO) is the UK’s largest supermarket chain. The groceries giant has a whopping 28.4% market share, trumping the likes of Sainsbury and Asda.

The company provides a multitude of products and services. These range from credit cards and savings accounts to petrol and clothing. Tesco is also the parent company of Bookera market-leading wholesale provider.

A consumer staple

At its lowest, the company’s share price had fallen by 17% in the market crash. However, today the share price is only 9% down on the year. That’s impressive considering the FTSE 100 index has shed around 30% of its value.

One explanation is the nature of the stock. As a consumer staple, Tesco provides a range of products and services that consumers need in times of crisis, as well as abundance.

Supermarkets across the UK are experiencing sky-high levels of demand for a range of goods in light of the global pandemic. Tesco’s ability to cope with this, and deliver the right products in an efficient manner, is integral to the continued dominance of the company in the UK supermarket scene.

Value to be had

However, that clearly hasn’t shielded the share price entirely. Thanks to the crash, shares in Tesco are currently trading at a price-to-earnings ratio of around 17.04.

That’s down from a figure of around 20 at the start of the year, which I think signals there’s value to be had, as well as the potential for further growth to come.

In terms of performance, sales were up 0.2% in the UK and Ireland, with group operating profit reaching £1,406m, up 25.4%. Free cash flow increased by £417m, an increase of 105%.

Worries and concerns?

My only concern is that Tesco operates in a very crowded market. Supermarket chains like Aldi and Lidl offer a cheap, convenient alternative while Waitrose and M&S offer an upmarket solution.

At this point, I’m asking myself, what makes Tesco stand out from the crowd?

I think a dominant market position and healthy margins are more than enough to face the growing competition.

All things considered, as Tesco continues to outperform the market and improve customer satisfaction across all channels, I think it’s a solid buy. Especially in light of a reduced price as a result of the market crash.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Matthew Dumigan has no position 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »