That’s why Marks and Spencer’s £4+ share price looks 54% undervalued to me right now
Marks and Spencer‘s (LSE: MKS) share price revival is no longer a hopeful story line but a concrete reality. But I think it will go up a lot, as its price meets ‘fair value’ over time.
Both Food and Clothing Deliver consistent growth, margins are improving, and the business looks structurally stronger than it has been in years.
Also, the sharp focus on value, quality, and efficiency makes this switch look solid rather than cyclical.
So how high do I think stocks will go?
Image source: Getty Images
Income growth momentum
Profit growth dictates the price of any company (and shares) over the long term.
The risk to Marks and Spencer is any further weakness in its cybersecurity systems following the attack announced on 22 April last year. As a result, management is estimated to have £300m taken out of its operating profit in the 2025/26 financial year.
Despite this, the basic business engines are moving in the right direction, in my opinion. Its H1 2025 results saw the Food category continue to outperform the broader market.
Sales jumped 7.8% year over year, marking three consecutive years of monthly volume growth.
This shows me that Marks is winning consumers over with quality, value and innovation rather than just pricing.
In Property and Homes, the recovery is slow but clearly underway. Availability quickly rebounded, as did online traffic, and the new range proved popular, helped by strong style assurance and better stock flow.
Added to this is an ongoing program of store renewal, a £340m investment in an improved Food supply chain, and a multi-year drive to automate and reduce supply costs. Taken together, these plans make the medium-term earnings picture look much stronger than the headline H1 numbers suggest.
In fact, consensus analyst estimates are that Marks’ earnings will grow at a high rate of 34% annually through 2028. This is an amazing track record for a business that has been cleared of previous growth.
What is the real value of the stock?
I did a discounted cash flow (DCF) study to find the true value of the shares. This future project will go into the core business and pay for itself to this day. It also reflects the company’s consensus analyst earnings growth forecasts.
The DCF model is my preferred valuation method, as it produces a clean, stable result, which is not influenced by over or under valuation of the entire business sector.
Some analysts’ DCF models are more bearish than mine, and some are more bullish, depending on the inputs used. However, based on myaa On off on my basis of the DCF estimate – which includes an 8% discount rate – Marks shares are undervalued by 54% at their current price of £4.04.
Therefore, its fair value could be privately approached at £8.78 a share – more than double where the stock is currently trading.
This gap is critical to long-term investor profitability, as asset prices tend to trade at their fair value over time. So this suggests a very strong buying opportunity to consider today if these predictions prove to be accurate.
My investment idea
The combination of growing earnings power, strong trading and modest valuations makes Marks and Spencer very attractive to me. So I will keep my holding on the stock.
And I strongly believe that stocks will continue to evolve towards their long-term fair value. Because of that, I think the shares are worth considering by other investors.
