The investment prospects of Next plc (LON:NXT) (NXT.L), Tesco PLC (LON:TSCO) (TSCO.L), Royal Bank of Scotland Group plc (LON:RBS) (RBS.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L) are my focus in this article. Is it time for me to become more optimistic about their outlooks?
The prospects for the Tesco share price have improved significantly in the last couple of years in my view. The company has been able to generate 2.5 years of positive like-for-like sales growth, and this trend is showing little sign of slowing down anytime soon.
With Tesco continuing to focus on becoming more efficient and the company having what appears to be a solid strategy, its PEG ratio of 0.8 may prove to be too low.
Morrisons may also be able to deliver on its growth potential. It has sought to put in place a business model that does not require large amounts of capital. In doing so it has therefore accessed a variety of growth areas without the need for major investment.
With Morrisons facing high levels of competition from peers, its prospects still remain tough. But with falling net debt levels and a special dividend, its outlook could be improving.
RBS continues to be underrated by investors in my opinion. The company has been able to deliver an improving underlying performance in recent years, and this has led to stronger prospects for the business.
Sure, legacy issues are set to hold back its overall performance over the medium term. But with a PE ratio that is barely in the double digits, the RBS share price could offer good value for money.
Next’s performance in the first quarter of the year was much stronger than the stock market was anticipating. The company’s strong customer loyalty and its capable management team seem to provide optimism regarding its future growth potential.
With the Next share price having gained 50% in the last year, it may lack the margin of safety it once had. But the company continues to have upside potential in my view in what remains a tough retail sector.