Opinion13 Jul 2018 12:54
THE MOTLEY FOOL
Jul 13th 2018 5:50AM
In the last two months, the Royal Mail(LSE: RMG) share price has fallen by around 20%. At the same time, the FTSE 100's price level has been relatively flat. Clearly, recent underperformance is disappointing for the company's investors. But with a relatively low valuation and an improving business model, the company's future outlook appears to be bright.
In fact, it has the potential to outperform the FTSE 100 in the long run. Alongside another cheap stock which reported positive results on Friday, now could be the perfect time to buy it.
IMPROVING PERFORMANCE
Recent results released by Royal Mail showed improving performance from its key divisions. In the UK, the company recorded its strongest parcel volume growth for four years, while its letters performance was resilient in a tough market. With online shopping continuing to prove popular among consumers, there could be further volume growth ahead for the company's parcels division.
Meanwhile, the international operations of the group, GLS, continue to offer strong growth. A mix of acquisitions and organic growth allowed the division to boost its adjusted operating profit by around 16% versus the prior year. This helped to partially offset a fall in profit from the UK, and in the long run the potential for international growth seems to be high.
With Royal Mail trading on a price-to-earnings (P/E) ratio of around 14, it seems to offer good value