Tesco (TSCDY) AI Stock Analysis

• Market Cap: $39.75B
• Dividend Yield: 3.08%
• Average Volume (3M): 42.99K
• Price to Earnings (P/E): 7.4
• Beta (1Y): 0.03
• Revenue Growth: 4.52%
• EPS Growth: -17.11%
• Country: US
• Employees: 340,000
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Grocery Stores
• EPS (TTM): 0.62
• Shares Outstanding: 2,128,394,300
• 10 Day Avg. Volume: 0
• 30 Day Avg. Volume: 42,989
• PEG Ratio: -4.04
• Price to Book (P/B): 2.25
• Price to Sales (P/S): 0.38
• P/FCF Ratio: 15.67
• Enterprise Value/Market Cap: 1.07
• Enterprise Value/Revenue: 0.60
• Enterprise Value/Gross Profit: 8.23
• Enterprise Value/Ebitda: 8.90
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 1.26
• Revenue Forecast (FY): $99.74B

• Rating: 74 Outperform
• Price Target: $22.00 ▲(22.29% Upside)
• Action: Reiterated Date: 10/09/25
• Date: Action: Reiterated 10/09/25

Tesco's overall stock score is driven by strong financial performance and positive technical indicators. The earnings call provided a boost with its positive outlook, despite some challenges. Valuation concerns slightly dampen the score, but the company's strategic initiatives and market position remain strong.

Positive Factors

UK Market Share Leadership

Sustained UK market share above 28% provides durable scale advantages: stronger supplier negotiating power, higher store traffic and merchandising leverage. This structural position supports stable revenue and resilience to competition, underpinning medium-term margin and cash generation.

Robust Online & Rapid Delivery Growth

Double-digit online growth and rapid delivery expansion reflect durable omnichannel capability. Strong digital penetration improves customer retention, lowers marginal distribution costs over time, and enables higher-margin channels like retail media and personalized promotions, strengthening long-term revenue mix.

Stable Balance Sheet & Improved ROE

Moderate leverage combined with a rising ROE indicates effective capital deployment and a balanced capital structure. This supports investment capacity and shareholder returns while retaining resilience to shocks, enabling sustained funding for strategic initiatives and operational improvements.

Negative Factors

Sharp Free Cash Flow Decline

A near 44% drop in free cash flow materially reduces financial flexibility to fund capex, deleveraging, or buybacks. Even with solid operating cash conversion, the FCF-to-net-income decline signals structural working-capital or investment timing pressures that could constrain strategic options over the next several quarters.

Rising Net Debt

An increase in net debt raises leverage and interest cost sensitivity, reducing headroom for discretionary spending. With leverage already moderate, further net-debt growth could pressure credit metrics and limit capacity to invest in growth or absorb shocks, affecting medium-term financial flexibility.

Operating Cost Inflation & New Levies

Sustained cost inflation and regulatory levies are structural margin headwinds that require persistent efficiency gains or price action to offset. If costs cannot be fully passed to consumers, margin compression may persist, challenging margin sustainability and competitive pricing strategies over multiple quarters.

Tesco Business Overview & Revenue Model

Company Description

Tesco PLC, together with its subsidiaries, engages in retailing and retail banking activities. It provides food products through approximately 4,752 stores in the United Kingdom, Republic of Ireland, the Czech Republic, Slovakia, and Hungary, as well as through online. The company is also involved in the food and drink wholesaling activities. In addition, it offers banking and insurance services in the United Kingdom. Further, the company operates a network of one stop convenience stores; and provides data science, technology, software, and consultancy services. Tesco PLC was founded in 1919 and is headquartered in Welwyn Garden City, the United Kingdom.

How the Company Makes Money

Tesco makes money primarily by selling goods to consumers through its retail network and digital channels. The largest revenue stream is retail sales from grocery and everyday products sold in-store (superstores, supermarkets, convenience formats) and via e-commerce with home delivery and click-and-collect, where revenue is recognized from the value of products sold to customers. Tesco also earns revenue from complementary retail activities, including fuel sales at Tesco-branded petrol stations attached to many stores (where revenue is driven by fuel volume and per-litre margin) and from sales of general merchandise and apparel, which typically carry different margin profiles than core grocery. In addition, Tesco generates income from financial services offered under the Tesco Bank brand (e.g., consumer banking and insurance products); earnings here are driven by net interest income on lending and investments, fees and commissions, and insurance-related income (specific product-level contributions vary over time). Tesco further monetizes its customer reach and data through retail media and advertising services (often sold to consumer packaged goods suppliers to promote products across Tesco’s digital and in-store channels), creating an additional high-margin income stream. Other contributing factors include commercial income from suppliers (such as promotional funding and trade terms tied to merchandising and marketing activity) and, where applicable, income from property-related arrangements; if any such components are not separately disclosed in a given period, their specific magnitude is null.

Tesco Financial Statement Overview

Summary

Tesco demonstrates strong financial performance with consistent revenue growth and improving profitability. The balance sheet is stable, though leverage needs monitoring. Cash flow management is robust, but declining free cash flow is a concern.

Income Statement

Tesco's income statement shows solid revenue growth over the years, with a Total Revenue increase from 2024 to 2025 by 2.54%. The Gross Profit Margin for 2025 stands at 7.22%, indicating efficient cost management. The Net Profit Margin improved to 2.33% in 2025, reflecting enhanced profitability. EBIT and EBITDA margins are strong at 3.88% and 6.82%, respectively, demonstrating operational efficiency. Overall, Tesco is on a positive trajectory with consistent revenue growth and improving margins.

Balance Sheet

Tesco's balance sheet indicates a stable financial position with a Debt-to-Equity Ratio of 1.26, reflecting a moderate level of leverage. Return on Equity (ROE) improved to 13.94% in 2025, highlighting effective use of equity capital. The Equity Ratio is 29.98%, demonstrating a balanced capital structure. While leverage remains a potential risk, Tesco's equity base and ROE suggest strong shareholder returns.

Cash Flow

Tesco's cash flow position shows a decrease in Free Cash Flow from 2024 to 2025 by -43.65%, which could be a concern. The Operating Cash Flow to Net Income Ratio is 1.80 in 2025, indicating strong cash generation relative to net income. However, the Free Cash Flow to Net Income Ratio dropped to 0.85, suggesting potential cash flow challenges. Overall, while Tesco generates solid operating cash, the drop in free cash flow warrants attention.

Breakdown	TTM	Feb 2025	Feb 2024	Feb 2023	Feb 2022	Feb 2021
Income Statement
Total Revenue	71.18B	69.92B	68.19B	65.76B	61.34B	57.89B
Gross Profit	5.15B	5.05B	4.66B	4.68B	4.69B	3.86B
EBITDA	4.76B	4.77B	4.83B	3.23B	4.40B	3.10B
Net Income	1.52B	1.63B	1.19B	737.00M	1.48B	690.00M
Balance Sheet
Total Assets	39.51B	38.84B	47.04B	46.13B	49.35B	45.51B
Cash, Cash Equivalents and Short-Term Investments	4.59B	4.48B	4.67B	4.45B	4.65B	3.70B
Total Debt	14.97B	14.67B	14.84B	15.08B	15.36B	15.67B
Total Liabilities	28.71B	27.23B	35.37B	33.90B	33.71B	33.45B
Stockholders Equity	10.81B	11.67B	11.67B	12.24B	15.66B	12.08B
Cash Flow
Free Cash Flow	2.51B	1.68B	2.73B	2.56B	2.61B	-737.00M
Operating Cash Flow	4.07B	2.92B	3.84B	3.81B	3.79B	640.00M
Investing Cash Flow	-1.71B	-441.00M	-1.70B	-790.00M	-1.77B	6.13B
Financing Cash Flow	-3.68B	-2.94B	-1.86B	-3.19B	-2.23B	-7.84B

Tesco Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 17.99
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSCDY, the sentiment is Neutral. The current price of 17.99 is below the 20-day moving average (MA) of 19.28, below the 50-day MA of 18.52, and above the 200-day MA of 17.57, indicating a neutral trend. The MACD of 0.09 indicates Positive momentum. The RSI at 43.95 is Neutral, neither overbought nor oversold. The STOCH value of 37.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSCDY.

Tesco Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSCDY	74 Outperform	$39.75B	7.42	13.57%	3.08%	4.52%	-17.11%
SFM	65 Neutral	$7.74B	15.05	38.21%	―	16.60%	49.76%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
KR	62 Neutral	$46.32B	11.48	13.04%	2.15%	-1.77%	-70.83%
ACI	61 Neutral	$8.89B	8.31	28.54%	3.49%	2.08%	-1.63%
WMK	58 Neutral	$1.64B	17.84	6.83%	2.06%	3.11%	6.54%
GO	45 Neutral	$568.31M	-4.43	-19.78%	―	7.22%	-108.99%