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.
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 Booker, a 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.
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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.