Marks and Spencer Group has been a consistent performer in the FTSE 100 index this year. The stock is up 45% over the last 6 months and nearly 40% for the year. Revenue growth is at 9.29% and the stock has a one year Beta of 0.52.
M&S still has the potential to be a FTSE-beating play, but can it maintain this level of performance going into 2025? Admittedly we have the festive season ahead of us, which could help to boost the company’s bottom line.
M&S shares sit within the Consumer Staples sector, so we need to consider how factors which influence stocks in this area are likely to drive the share price. We’ve seen some strong performance from the company’s ROE (return on equity) ratio, which bodes well, but net change in cash has been less impressive, and this can create drag on shares in this sector.
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Twelve consecutive quarters of increased income
We have seen 12 consecutive quarters of increase in the M&S income line versus previous corresponding quarter, which reinforces a positive growth story.
The price-to earnings (P/E) ratio stands at around 16.25, which is beneath the industry norm of 29.9. This lower ratio implies that the market anticipates less growth from the company in comparison to its peers, but it makes the stock still relatively cheap, despite the gains in the M&S share price this year.
In assessing market value through the TEV to total revenue ratio, Marks and Spencer’s scores 0.68, which is beneath the industry norms of 1.79 for this sector. The ratio indicates that the market places a relatively lower value on the company’s assets in comparison to its revenue, importantly against industry averages.
The M&S gross margin became negative in the last period the company reported for, which is a clear sign of operational losses with costs outweighing sales. This deterioration from last year’s same quarter indicates continuous struggles in profitability, which are not immediately evident in the share price. Moreover, being below the industry average of 32.3% reveals the company’s limited capabilities in cost management, potentially hindering future earnings.
Another factor to watch is the drop in Marks and Spencer’s EBITDA margin to 6.8%, lower than both the figure from the previous year, 7.6%, and the industry average of 8.5%. This trend points to a weakening in both operational efficiency and overall profitability relative to the industry.
Source: Bridgewise
It is worth noting in the chart above how M&S is performing against its closest real peers in the market. The comparison with Tesco, for example, is especially interesting. But also look at Finland’s Kesko Oyj, which has a much smaller domestic market to play with.
Marks and Spencer Group technical analysis
Below we have the trend data for the Marks and Spencer share price, kindly provided by our friends at Trend Intelligence. This is a medium term technical set up for M&S stock.
In the first chart we can see that the M&S share price is above all three of Trend’s moving averages. The averages remain organised in a fully positive configuration, the shorter average above the medium and long term averages. This is a positive trend.
The M&S share price also trades all above the Japanese Cloud Indicator – the delay line remains above the cloud. The most recent average Japanese candle is green. This is also a positive trend.
Looking at the second chart, which is the D* Momentum Indicator, it is a high positive reading of the Trend Intelligence D*: the negative is way below the positive indicator. This is a positive trend overall.
The third chart is the R* Momentum Indicator: this is another positive indicator, with the data points trending slightly downwards, but well above the zero cut off.
The final – bottom – chart, the M* Momentum Indicator, is also fully positive, with the fast red M* line above the white and blue signal lines, trending upwards.
The medium term outlook for Marks and Spencer shares
The medium term outlook for M&S shares, from the technical analysis delivered by Trend Intelligence, is that the M&S share price will continue to exhibit strong performance in the weeks and months ahead. The summary above shows price action operating above all three of the moving averages, AND the Japanese cloud. There are no neutral or negative signals.
