Investors often look at earnings relative to a company’s share price when assessing which stocks offer the best value. But despite having an incredibly low price-to-earnings (P/E) ratio, there’s one stock on the FTSE 250 that seems to attract very little attention.
Why is that? Let’s take a closer look.
Who are we talking about?
Yesterday (16 July), Frasers Group (LSE:FRAS), the British retailer, announced its results for the 52 weeks ended 26 April 2026 (FY26).
Having opened its first store in Maidenhead in 1982, the group’s come a long way. For FY26, it reported revenue of £5.33bn, an adjusted profit before tax of £583m, and cash flow from operating activities of £584m.
With adjusted earnings per share (EPS) of 83.3p, the group’s stock now trades on just 9 times earnings. For such a cash generative company, this looks incredibly cheap. Having said that, JD Sports Fashion, which has fallen out of favour with investors in recent years, is even cheaper. It’s valued at 7.5 times EPS.
But that’s not the full picture.
Other interests
As part of its mission to “build the planet’s most admired and compelling brand ecosystem”, Frasers likes to buy stakes in other retailers. Indeed, it recently launched a takeover bid for Hugo Boss. The £2.4bn offer has been described by the German fashion as “inadequate”.
Incidentally, Hugo Boss currently trades at 10.5 times its 2025 EPS of €3.61.
Other investments include stakes in AO World, the online electrical retailer, as well as ASOS and Debenhams Group/Boohoo Group. The combined value of these positions was £1.28bn at the end of FY26.
In addition, Frasers has an investment property portfolio valued at £852m. Recent acquisitions include shopping centres in Swindon and Braehead.
If the value of these investments (shares and property) is deducted from the group’s market cap, it means investors value its retailing activities, which include Sports Direct and Flannels, at a miserly £1.28bn. This is just 1.4 times its FY26 retail profit from trading.
So why don’t investors value Frasers more highly? Well, it appears they have the following concerns:
- Dominance of one shareholder – the group’s founder, Mike Ashley, who is no longer involved in day-to-day management, retains a 74% stake.
- Lack of clarity – it can be difficult to know what the group’s trying to achieve.
- No dividends – the company prefers to “preserve financial flexibility and facilitate future investments and other growth opportunities” rather than return cash to shareholders. Although it does periodically buy some of its own shares.
- Sector-specific concerns – UK-centric retailers appear to be out of favour with investors at the moment.
My view
Personally, I think Frasers offers tremendous value at the moment. But I don’t want to invest for two reasons.
Firstly, I already have a stake in JD Sports. It wouldn’t be a good idea to have more exposure to the athleisure market in my portfolio.
Secondly, despite the group delivering some strong results in recent years, its share price remains subdued. It doesn’t matter how undervalued I think Frasers might be, if other investors don’t agree, there’s little point taking a stake. And there’s no dividend to keep me happy while waiting for others (hopefully) to be convinced that they are missing out on a bargain.
In summary, I believe there are better opportunities to consider elsewhere.
Should you invest £5,000 in Frasers Group Plc right now?
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James Beard owns shares in JD Sports Fashion plc.
