HomeStock Market3 reasons I like Royal Mail stock

3 reasons I like Royal Mail stock

After nearly two years of steady decline, Royal Mail (London Stock Exchange: RMG) Finally found a foothold in the second half of last year, because the stock market began to recover after the market crash last year. Did not look back since. Now, Royal Mail’s share price is up 222% from last year.

#1.Robust financial performance

The fundamental of its share price performance is the improvement of its financial situation. This is the first reason why I like Royal Mail sharing. For the full year ending March 28, 2021, the company’s reported revenue increased by 16.6%, thanks to the growth of its parcel business and Amsterdam-based subsidiary GLS. Its pre-tax profit increased by 303% to 726 million pounds. And its net debt has also decreased.

#2.Make peace

As early as the ongoing dispute between the company’s management and its powerful labor union, its stock price performance has been affected. But at the end of last year, it was finally able to reach a deal, which eliminated the huge source of uncertainty in stock prices. This is the second reason why I think the current share is expected to be realized. If the company can maintain its strong performance, I expect its stock price to rise even more.

#3.competitive price

Even with huge growth so far, its stock price is still 9.5 times more competitive. This is much lower than many other outstanding FTSE indexes. This is the third reason why I like company shares. I think that as long as investors are optimistic, this can push Royal Mail’s stock price higher. Although the current yield is only 1.7%, it also paid out dividends.

Why should i be cautious

However, I am also very cautious for two reasons.

First, the past year was an extraordinary year. Royal Mail’s parcel business has gained a huge boost from the lock-in. Or as the company releases the latest results, “Over five centuries of history, packages rather than letters have provided the Royal Mail with most of its revenue.”

Although there may have been some permanent shifts to online shopping, the lock-in has now been eased, but we will soon know exactly how much. I think it is foreseeable that the parcel business will slow down this fiscal year. However, for Royal Mail to continue to maintain its strong growth momentum, this change should not be just a flash.

Second, the company itself is not entirely optimistic about the prospects.It says that uncertain factors may affect its performance, although it does cautious By saying yes “Reason for optimism”.

My takeaway

In general, I think Royal Mail’s shares are very attractive.When I wrote this book last time, I was always looking for more evidence Improvement of basic conditions, This has already happened. If I really want to be cautious, I will wait for another few updates to see how it works after the lock. If not, it was bought for me.

Minika Prince There is no position in any of the aforementioned shares. Motley Fool UK has no position in any of the aforementioned shares. The views expressed by the companies mentioned in this article are only those of the author, and therefore may differ from the formal recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro.At The Motley Fool, we believe that taking into account a variety of insights can make We are better investors.

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