TSCDY changes

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View the full Nov 12, 2026 version

Price: $22.05
Discount category: Far above intrinsic value
Intrinsic value source: AI estimate
Next earnings: Jan 14, 2027
Next earnings is estimate: No
Company name: added: Tesco
Sector: added: Supermarkets and grocery retail
About: added: Tesco PLC (Tesco) is a British food retailer. It runs supermarkets, convenience stores, online grocery and rapid delivery in the United Kingdom, the Republic of Ireland (ROI) and Central Europe, and it owns Booker, a food wholesaler. It also sells clothing and home goods as F&F, and it earns income from Clubcard, Tesco Media (advertising), Whoosh rapid delivery, Insurance & Money Services and Tesco Mobile. Tesco reports in pounds. On a 52-week basis, sales were £66,588 million and Group adjusted operating profit was £3,152 million in FY 25/26. In the 26 weeks to August 29, 2026, sales were £33,776 million and adjusted operating profit was £1,783 million. The shares in this pick are American depositary receipts (ADRs): TSCDY is a sponsored Level 1 program that trades over the counter in US dollars, and J.P. Morgan is the depositary. One ADR equals three ordinary shares (a ratio of 1:3, from Tesco's ADR page). Tesco is not an SEC filer, so its own English reports are the source. Ken Murphy is Chief Executive.
Thesis: added: Tesco trades above the AI estimate because investors pay for a steady grocer that grows profit and returns cash, even though its market is slow. Its profit depends on holding UK market share against discounters, on prices that stay low enough to keep customers, and on savings and new income streams that pay for that investment. Tesco also reports in pounds while the ADR trades in dollars, so the exchange rate moves the ADR price. For the price to hold, three things must be true. UK like-for-like sales must stay positive and market share must hold near its present level: Worldpanel share was 27.8% in the half, down 24 basis points from an exceptionally strong year before. Save to Invest must deliver its £500 million savings for FY 26/27, so that profit grows while Tesco keeps lowering prices, for example with Aldi Price Match. And free cash flow must stay between £1.5 billion and £2.0 billion, so that the £950 million buyback and a progressive dividend are paid without more debt. Net debt to EBITDA was 2.0 times, below the target range of 2.3 to 2.8 times. The Q3 and Christmas trading statement on January 14, 2027 and the FY 26/27 results in April 2027 are the next tests.
Valuation: added: The intrinsic value for Tesco is an AI estimate from November 12, 2026. It is not an analyst's value. An AI research agent calculated it from Tesco's own reports. Tesco is not an SEC filer, so every input comes from the English reports on tescoplc.com. The ADR, TSCDY, is a sponsored Level 1 program of J.P. Morgan that trades over the counter in US dollars. One ADR equals three ordinary shares (a ratio of 1:3, from Tesco's ADR page), so the value is per ADR. The method is a multiple of adjusted diluted EPS for FY 27/28, which ends in February 2028, converted to US dollars. Adjusted EPS is after interest, lease interest and tax, so the estimate makes no debt adjustment. The interim results for FY 26/27 (October 8, 2026) give adjusted operating profit of £1,783 million, adjusted net finance costs of £274 million, an adjusted tax rate of 26.8% with about 27% expected for the full year, adjusted diluted EPS of 17.3p on 6,352 million diluted shares, free cash flow of £1,570 million, net debt of £10,037 million including £7,852 million of leases, and 6,265,124,955 shares in issue at August 29, 2026. They guide FY 26/27 adjusted operating profit to £3.15 billion to £3.30 billion and free cash flow to £1.5 billion to £2.0 billion, and they raise the buyback to £950 million, to end by April 2027. The FY 25/26 results (April 16, 2026) give adjusted operating profit of £3,152 million, adjusted diluted EPS of 29.0p and a dividend of 14.5p. Tesco grew adjusted operating profit by 7.9% a year over the last four years. The FY 27/28 figures, the multiples and the exchange rate are assumptions. The exchange rate is $1.3349 per pound, the market rate on November 11, 2026. The low case assumes flat adjusted operating profit of £3,150 million, finance costs of £560 million, a tax rate of 27% and 6,200 million diluted shares, with adjusted EPS of 30.5p, at 11 times. It gives 335p, or $13.43 per ADR. The base case assumes adjusted operating profit of £3,450 million, which is about 6% above £3.25 billion for FY 26/27, finance costs of £545 million and 6,170 million diluted shares after the buyback, with adjusted EPS of 34.4p, at 14 times. It gives 481p, or $19.27 per ADR. The high case assumes adjusted operating profit of £3,650 million, finance costs of £540 million and 6,150 million diluted shares, with adjusted EPS of 36.9p, at 16 times. It gives 591p, or $23.65 per ADR. The estimate assumes weights of 25%, 50% and 25%. The weighted intrinsic value is $18.91 per ADR. As of Nov 12, 2026.
Risks: added: UK grocery competition is strong. Worldpanel UK market share was 27.8% in the half, down 24 basis points from a year with record weather and rival disruption. Tesco spends on price, with Aldi Price Match on about 700 products, and discounters can still take share. Booker, the wholesale business, had like-for-like sales down 2.6% in the half, and its adjusted operating profit was flat at £163 million. More falls in wholesale sales would hold back Group profit. Costs rise. Tesco said that investment in the customer offer and operating cost inflation offset part of the gain from a better sales mix. The £500 million Save to Invest savings must cover these costs for profit to grow. Tesco earns pounds, and the ADR trades in dollars. A weaker pound lowers the ADR price in dollars even when profit is steady. The ADR also trades over the counter, with less trading than the shares have in London. Tesco said that consumer confidence was resilient in the first half, but ongoing geopolitical tension keeps uncertainty high for households. Leases of £7,852 million also commit Tesco to fixed payments, and fixed charge cover was 4.2 times.
Balance sheet: added: Tesco reported net debt of £10,037 million at August 29, 2026, down from £10,563 million at February 2026. Of this, £7,852 million is lease liabilities and £2,185 million is net debt before leases. Borrowings were £6,918 million (£1,257 million current and £5,661 million non-current), cash and cash equivalents were £2,704 million, and short-term investments were £1,482 million. Net debt to EBITDA was 2.0 times, below the target range of 2.3 to 2.8 times, and fixed charge cover was 4.2 times. Liquidity was £3.1 billion, and the £2.5 billion revolving credit facility is undrawn and runs to October 2029. The net pension surplus, after deferred tax, was £425 million. Return on capital employed was 15.2%. Free cash flow was £1,570 million in the half, and about £250 million of it is payroll timing that reverses in the second half. Tesco bought back shares for £558 million in the half and paid £613 million of the prior year final dividend. At August 29, 2026, 6,265,124,955 ordinary shares were in issue. As of Aug 29, 2026.
Checkpoints: added: Oct 8, 2026: Interim results FY 26/27: profit and outlook. Passed. Watch: Growth in adjusted operating profit at constant rates with the FY 26/27 outlook kept or raised passes; a cut to the outlook fails. Outcome: Adjusted operating profit rose 6.3% at constant rates to £1,783 million, and Tesco raised the low end of its outlook to £3.15 billion. Jan 14, 2027: Q3 and Christmas trading statement: UK sales. Pending. Watch: UK like-for-like sales growth of 1% or more with the outlook kept passes; negative UK like-for-like sales or a cut to the outlook fails. Apr 2027 (estimate): FY 26/27 results: profit, cash and buyback. Pending. Watch: Adjusted operating profit in the guided range, free cash flow of £1.5 billion or more and the £950 million buyback done by April 2027 pass; a miss on these fails.
Recent events: added: Oct 8, 2026: Tesco reported interim results for FY 26/27 (26 weeks to August 29, 2026). Group sales were £33,776 million, up 1.6% at constant rates, and like-for-like sales rose 1.0%: UK up 1.5%, ROI up 4.1%, Central Europe up 0.4% and Booker down 2.6%. Adjusted operating profit rose 6.3% at constant rates to £1,783 million, and adjusted diluted EPS rose 12.2% to 17.3p. Free cash flow was £1,570 million, which includes about £250 million of payroll timing that reverses in the second half. Oct 8, 2026: Tesco raised its FY 26/27 outlook for Group adjusted operating profit to £3.15 billion to £3.30 billion, from £3.0 billion to £3.3 billion. It kept free cash flow guidance at £1.5 billion to £2.0 billion, raised capital expenditure guidance to about £1.7 billion from £1.6 billion, and raised the FY 26/27 share buyback to £950 million from £750 million. The buyback ends by April 2027. Oct 8, 2026: The Board set an interim dividend of 5.05p per share, up 5.2% from 4.80p. Tesco pays it on November 20, 2026 to holders on the register on October 16, 2026. Oct 2, 2026: Tesco refinanced its £2.5 billion revolving credit facility. The facility has an initial term of three years, to October 2029, with two options to extend by one year each, and it is undrawn. Jun 18, 2026: Tesco reported its Q1 FY 26/27 trading statement. Group sales for the 13 weeks to May 30, 2026 were £16,826 million, and Group like-for-like sales rose 1.0%: UK up 1.8%, ROI up 3.3%, Booker down 3.2% and Central Europe up 0.8%. UK online sales rose 8.9%, and Tesco extended Aldi Price Match to over 2,000 Express stores. Apr 16, 2026: Tesco reported FY 25/26 results. On a 52-week basis, sales were £66,588 million, adjusted operating profit was £3,152 million, adjusted diluted EPS was 29.0p and free cash flow was £1,957 million. The full-year dividend was 14.5p. Tesco guided FY 26/27 Group adjusted operating profit to £3.0 billion to £3.3 billion.