Royal Mail can quite rightly be deemed as a British Institution and Royal Mail shares are very much a stalwart of the British landscape even if private ownership is a more recent option.
Having been founded in 1516, Royal Mail was for the most-part a public or state run entity and in fact only listed on the LSE in 2013 under the ticker LSE:RMG.
During the early years of Royal Mail shares listing on the LSE, the UK government even kept hold of 30% of the company and only moved to sell these 2 years later to now leave Royal Mail an entirely private enterprise.
‘Golden Hello’ was a bitter pill for Royal Mail Shares
In 2018, Royal Mail shareholders were seemingly less than impressed at a £6million ‘golden hello’ that was issued to their incoming CEO, Rico Back. The controversy surrounding their new chief executive did not stop there and in fact has caused various other issues due in no small part down to his working pattern which has been split between the UK and Switzerland.
Controversy at C-Level will typically cause volatile share price movement one way or another. We have seen this with the tumultuous relationship between Elon Musks’ Twitter feed and the Tesla share price. Elon is great value but nonetheless his eccentricity has put him on the wrong side of shareholders mood boards more than once.
Royal Mail shares have not been immune from this either, as shown by this FTSE250 companies’ share price dropping from as high as 6310p in 2018 down to 1188.60p in April 2020. That marks a remarkable movement down by c. 80% during a period when stock markets in general have been on the rise. Even without the drops in the market seen during Covid-19, RMG was very much on a decline with Back at the helm, rightly or wrongly.
The departure : more gold and a bounce for shareholders
The departure of Rico Back seems to have the adverse effect on Royal Mail shares with an immediate 8% single day bounce being seen in the price almost as soon his termination was announced.
A golden farewell of around £1million hasn’t caused as much controversy as met his hiring, but stakeholders were not pleased nonetheless.
This goes to show, that if shareholder sentiment is not with you as a company, you can suffer under this toil. All the negative attention that the ‘flying postman’ (Mr Back’s media appointed nickname) brought with him due to his differences in working certainly did not help things.
So where do Royal Mail and Royal Mail shares go in the future?
Well, now that is the million dollar question.
The search for a permanent successor to Rico Back goes on but in the meantime shareholders clearly feel more confident that Stuart Simpson (who has been appointed as UK operations CEO), and Keith Williams (taking on an executive role), will lead Royal Mail to better days in the interim.
Whilst the Royal Mail share price is on an upward trend, this will give a nice bit of respite to long-term holders of the stock. Ss their faith in this 504 year old industry veteran well placed or are they just too slow to adapt to the changing landscape that has seen tech companies move up the list of most valuable companies?
Brokers seem to be split on Royal Mail shares rebounding
Taking a look at various different broker forecasts on RMG price targets paints quite a split picture for current holders of Royal Mail shares, or indeed anyone who is considering taking their first bite at the British stalwart.
The 12 month price target average is 1480.0p which is 18% down from where the stock stands today. The more optimistic traders amongst the set have a highest PT of 2500.0p, representing a potential upside of 38%.
More upside than downside then for LSE:RMG?
With 6 of the forecasts going for buy, outperform or hold ratings, and 7 making underperform, or sell recommendations we have a clear split panel.
In cases such as these, your own best judgement will stand you in better stead than trying to pick through these bones. You would be wise to make an informed decision.
Financials paint a difficult picture for Royal Mail
The key financial KPI’s for RMG have been on the decline since 2015, with just a small rebound leading to 2017. This rebound has long since past and net income has dropped from £272million in 2017 to £175million for 2019.
Earnings Per Share have dropped by more than 32% over a 5 year period. The fact that this is largely in line with industry competitors could mean that it is not a specific Royal Mail shares issue but that of the sector as a whole.
Debt to capital ratios at Royal Mail have risen in the past 12 months from c.13% up to 24.6%. Looking at this metric alone without knowing where the money has been spent is an unfair parallel. £543million was spent on ‘investing activities’ and £312million on cash flow financing.
Royal Mail continues to bring in the money; more than £10.5billion in revenues for the last financial year represent a 4% increase year on year. The costs associated with bringing in these revenues has risen alongside the additional investments Royal Mail have made, all to try to stay relevant over the next 500 years and not fade into the background.
So will Royal Mail adapt and grow or are Royal Mail shares set for further turmoil in the coming years ahead?
How to get a piece of the Royal Mail shares action
This is going to depend on how you think the performance and market will change over time. By and large, these methods are the same for any share you are interested in.
If your view is that the share price will grow, or you have Royal Mail dividend related goals, then you need to be on the ‘buy’ side of the trade. This will leave you with a few options as to how to purchase.
For those of you that are in the UK, and still have stocks & shares ISA balances available, this could provide a good opportunity to add Royal Mail shares to your portfolio within a tax free wrapper.
If you don’t currently have an account or platform you use to buy shares then you can do so via eToro who offer a great platform and commission free trading. You can read our eToro review here before making your decision. Be mindful that if you are planning to hold long-term, you need to ensure leverage is set to x1 when you buy and there will be no fees for your acquisition.
How to profit if Royal Mail shares go down in price?
If you are interested in taking advantage of short-term movements in the Royal Mail share price or you feel that the stock will drop and would like to trade as a CFD, then you can also do so via eToro. You will also have the option to utilise leverage on direct shares of up to 1:5, this will amplify the movements in the market.
Royal Mail Shares form 1 component part of the FTSE250 index so there is also the option to add LSE:RMG with a wider UK listed index based approach.
Indices are trade-able as CFDs on most major platforms these days, but it is more common to find the FTSE100 rather than the 250. Ensure you check out the coverage beforehand.
Whatever action you decide to take, or even if you are just here to see what is happening at Royal Mail, remember to trade safe.
Never invest any more than you can comfortably afford to lose… after all, volatility can swing both with, and against you.