Is Marks & Spencer the FTSE 100’s most overvalued inventory? – Imperial Wire

Figuring out probably undervalued shares is the key to worthwhile investing. Certainly, this has been the method of lots of the world’s most profitable traders. And by specializing in an organization’s fundamentals like its aggressive place and stability sheet energy, it’s doable to establish alternatives that others may overlook.

Nonetheless, based mostly on Marks & Spencer’s (LSE:MKS) earnings over the previous 12 months, the retailer is the costliest inventory on the FTSE 100. Certainly not? Let’s take a better look.

Crunching the numbers

Throughout the 52 weeks to 27 September 2025, the British icon reported primary earnings per share (EPS) of 0.9p. With a share worth of slightly below 382p as I write on 11 February, it means the inventory’s buying and selling on an eye-watering 424 occasions earnings. This places it comfortably on the prime of the league desk of the FTSE 100’s price-to-earnings (P/E) ratios. By anybody’s requirements, that is extremely costly.

Nonetheless, over this era, M&S suffered a devastating cyberattack, from which it nonetheless hasn’t totally recovered. This resulted in distinctive expenses — estimated to be within the area of £140m – being incurred. On prime of this, there was a lack of income (and revenue) as its web site was unavailable for weeks.

Additionally, from 29 March 2025 to 27 September 2025, web debt elevated from £1.79bn to £2.53bn. Having stated that, the group remained in a web money place on the finish of this era when lease liabilities are eliminated.

For apparent causes, firms favor to report adjusted earnings that take away the affect of those (hopefully) one-off occasions. Doing this offers a revised EPS of 23.8p and P/E ratio of 16. Instantly, the British retailer seems to be to be a way more engaging prospect.

That’s in all probability why analysts have a 12-month share worth goal that’s 15% increased than right this moment’s worth. Berenberg says the inventory trades on simply 10 occasions its March 2027 forecast earnings. And as a result of its money stream potential, the financial institution’s anticipating that M&S can be able to enhance its dividend yield to three%-4%. Nonetheless, this appears bold to me on condition that the historic (trailing 12 months) return is 0.9%.

Endurance is essential

However I believe will probably be some time earlier than investor confidence is totally restored, though I’m sure that the group’s now in a greater place to resist one other cyber assault. M&S’s standing as a much-loved British establishment — and its profitable efforts to shed its picture as a vendor of frumpy clothes — has seen buyers return.

The group reported a document variety of clients over the Christmas season. Its boss stated: “Meals gross sales had been robust, and the enterprise continues to outperform, hitting a brand new market share milestone within the interval.” Encouragingly, he added: “Style, residence and sweetness is getting again on observe as we work by way of the tail finish of restoration.”

The meals aspect of the enterprise continues to be the star performer. And to benefit from weight-loss medicine resulting in smaller appetites, it’s launched a ‘Nutrient Dense’ vary. Additionally, its 50:50 three way partnership with Ocado, is doing very effectively. It’s presently the fastest-growing grocer within the UK.

On reflection, I don’t assume Marks & Spencer is essentially the most overvalued FTSE 100 inventory. In contrast, I reckon it may very well be one in every of its finest bargains. For that reason, I believe it’s a restoration inventory for long-term traders to contemplate.