https://investomania.co.uk/2018/11/does ... potential/
Can Royal Mail PLC (LON:RMG) (RMG.L) recover after a challenging period?
This year has been a difficult one for Royal Mail PLC (LON:RMG) (RMG.L). Its share price has declined from a high of 631p in May to now trade at around 316p.
A recent profit warning is a major contributing factor in this fall in my view. The company released news that its cost avoidance and efficiency strategies are not having their desired impacts, and its financial performance may therefore not be as strong as was previously anticipated.
In the near term, I feel that there could be a further decline in investor sentiment towards the stock. The prospects for the business remain uncertain according to my research, with a new management team set to deliver a revised strategy over future months. This could lead to a stronger business in the long run, but uncertainty may be elevated in the short run.
Royal Mail’s international growth prospects remain impressive in my opinion. It has been able to expand abroad through acquisitions, and further investment in this area could be ahead. It has generated relatively high growth rates from its international division, GLS, and as it becomes a larger part of the overall business it could have a greater impact on total profitability.
The company’s parcels delivery business in the UK may also catalyse its financial performance in my view. Demand for online deliveries could grow as technology improves and people become more comfortable in ordering goods online.
Therefore, I feel that the Royal Mail share price could have recovery potential in the long run. It has a P/E ratio of around 8.2, which is relatively low for a FTSE 100 share at the moment according to my research. With a 5%+ dividend yield it could also income investing potential to my mind, and alongside its capital growth prospects this could lead to improving total returns.
Although there may be further volatility and risk ahead for the business, I believe that it could enjoy improved overall performance in future years.