Both Marks and Spencer (LSE: MKS) and Tesco (LSE: TSCO) shares are performing well at the moment. Over the last year, they’ve risen about 50% and 24%, respectively.
Wondering which shares are looking most attractive today? Let’s compare them and try to find out.
Which business has more momentum?
Let’s start with a look at which business is performing better today.
Looking at analysts’ forecasts, Marks and Spencer’s revenues are expected to increase 3.7% this financial year (ending 31 March 2025). That compares to growth of 2.4% for Tesco (its financial year ends on 28 February 2025).
As for earnings per share, Marks and Spencer is expected to generate growth of 14%. That compares to 3% for Tesco.
So, Marks and Spencer is the clear winner here. Not only is it growing its top line faster, but its earnings growth is expected to be far superior to that of its peer.
Which shares are cheaper?
Moving on to valuation, Marks and Spencer shares currently trade on a price-to-earnings (P/E) ratio of 11.2. Meanwhile, Tesco shares sport a P/E ratio of 12.1.
So, Marks and Spencer is the cheaper stock.
It’s worth noting that the average analyst price target for Marks and Spencer is 18% higher than the current share price. However, for Tesco, it’s only 12% higher than the current price.
Overall, Marks and Spencer looks to have more potential for capital gains.
Who has the highest dividend?
Tesco is the winner when it comes to dividends, however.
Currently, its shares yield about 4.1% By contrast, the yield on Marks and Spencer shares is only 1.9%.
Do note that next financial year, Marks and Spencer is forecast to raise its payout by 25% versus 9% for Tesco. So, the yield gap could narrow in the future.
What are the risks?
As for risks, both companies face them.
I think the biggest risk for Tesco is that customers move to lower-cost supermarkets like Lidl and Aldi. Marks and Spencer may be protected from this to a degree as it has a more affluent customer base. These customers are less likely to be impacted by the cost-of-living crisis.
For M&S though, the biggest risk might be competition in the clothing space. It’s having a lot of success in clothing at the moment, but there’s no guarantee that this will continue. Rivals new and old are everywhere.
The winner?
Putting this all together, it’s a close call but the winner for me is Marks and Spencer. It’s the stock I’d buy today if I was looking to snap up one of these blue-chip retailers for my portfolio.
I do think there’s a lot to like about Tesco shares right now. The valuation is very reasonable and the dividend yield is attractive. But in terms of potential for overall returns (gains and income) in the years ahead, I think Marks and Spencer has the edge.
The post Marks & Spencer vs Tesco: which are the best shares to buy today? appeared first on The Motley Fool UK.
Should you buy Marks and Spencer now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
2 brilliant FTSE 100 stocks for investors to consider buying in July!
Here’s how much income I’d get if I invested all my ISA in Tesco shares
What’s the best FTSE 100 stock to buy now the general election is almost behind us?
2 cheap FTSE 100 shares I’ll avoid like the plague in July!
This retail giant could be one of the best UK value stocks around!
Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.
