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Will the Tesco share price hit a 10-year high in 2024?

Up from 200p less than two years ago, the Tesco share price has enjoyed impressive growth lately. Now I’m considering whether the current price is too high.

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Female Tesco employee holding produce crate

Image source: Tesco plc

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The Tesco (LSE: TSCO) share price is increasingly close to hitting a new 10-year high. In late July 2014, it was trading at around 330p, just a few percentage points from the current 318p price.

But with the price now so high, what might the future hold?

Created with Highcharts 11.4.3Tesco Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Evaluating value

There are several ways to evaluate whether a stock is currently trading at good value. In other words, the price appears to be lower than it should be and has growth potential. 

Should you invest £1,000 in Tesco right now?

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However, the metrics typically use past, or trailing, data that isn’t necessarily indicative of future performance. As such, they should be used in conjunction with other information about the industry, management, and board decisions to get the full picture.

Price vs earnings growth

One good metric that I think is under-used is the price-to-earnings growth ratio (PEG). This ratio compares the price to the rate at which earnings are increasing. Unlike the price-to-earnings (P/E) ratio, PEG is a more accurate representation of company performance over time, rather than just at a point in time. If the price and earnings growth are equally matched, this metric will be one. Anything higher than that means the price is growing quicker than earnings and may be overvalued.

Tesco currently has a PEG ratio of 4.4 and P/E ratio of 12.4. Considering the P/E, it looks cheap — but the high PEG suggests the price is exceeding earnings growth. This indicates that shareholders trust in the company’s future and expect earnings to keep growing – but that doesn’t mean the price will. By comparison, rival Sainsbury’s PEG ratio is only 1.8, but its P/E ratio is 45. It’s had slow price and earnings growth but still looks overvalued due to recent earnings missing analyst expectations.

Future return on equity

Return on equity (ROE) is critical because it’s the clearest indicator of how well a company is using shareholder equity. ROE is calculated simply by dividing the latest annual income figure by the average equity over a year. Forecasting future ROE is a bit more complex and requires certain assumptions to be made about the company’s continued operations. Still, it’s a worthy consideration.

On average, analysts expect Tesco’s future ROE to be around 18% in three years, up from 15% currently. Considering the average FTSE 100 stock has an ROE of 11%, that looks pretty good to me. Of course, a lot could happen in that time so it’s important to also assess the stability of the industry.

Retail in the UK

The retail industry and grocers in particular are considered defensive by nature. People need to eat even if the economy is struggling, so the industry has historically remained strong. And at 27%, Tesco’s market share is considerable, so it would take a serious issue to derail it. This is up from 25.8% in 2020, despite four years of economic uncertainty and disruption.

Overall, Tesco remains one of my favourite stocks for reliable, long-term returns. That said, I don’t expect the price to reach a 10-year high this year. It’s at the top end of a range it’s been trading in for five years with little evidence to suggest it will rise further. I’m holding my shares for now but if I were looking to buy more, I’d wait until later in the year.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Hartley has positions in Tesco Plc. The Motley Fool UK has recommended J Sainsbury Plc and Tesco Plc. 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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