It’s been a painful couple of months for shareholders in Royal Mail Group (LSE: RMG). After riding high in early 2022, the Royal Mail share price has undergone a brutal slump. As a result, it’s now one of the worst performers in the FTSE 100 index this calendar year. Even worse, this popular stock opened down steeply on Tuesday, before bouncing back to recover most of Tuesday’s loss.
The Royal Mail share price: riding the roller coaster
At its 52-week high, the Royal Mail share price peaked above £6, hitting a high of 613.8p on 8 June 2021. It then slumped over the next four months, losing more than a third of its value by early October. But then the shares rebounded hard, leaping strongly over the next three months. On 5 January, Royal Mail shares hit their 2022 high of 531.4p.
Alas, it’s all been downhill since then. As I write, the Royal Mail share price stands at 352.1p, down 2.6p (-0.7%) today. However, earlier this morning, the stock slumped to an intra-day low of 330.9p, before jumping back to its current level. Given that there was no major news released by the group today, I assume that strong selling pressure drove down the share price at the market open.
As a result, the Royal Mail share price is down 5.5% over five days, 10.3% over a month, 30.1% in 2022, 19.4% over six months, 31% over one year, and 17.2% over five years. And you’d be hard pushed to find a worse performer in the FTSE 100 this year, because RMG is #97 out of 100 in the Footsie in 2022. Yikes.
Are Royal Mail shares too cheap today?
After its initial plunge this morning, the Royal Mail share price has leapt around 6.4%. To me, this suggests that bargain hunters are buying this stock when it weakens. Perhaps, like me, they are value investors looking to buy into solid businesses at low prices?
To be honest, I’ve had my eye on Royal Mail as a potential investment for several months. While the price has been sliding, I’ve watched it very keenly. But even I am slightly shocked by the steep decline in the Royal Mail share price recently.
To me, the Royal Mail is an easily understood business. The UK’s universal postal service provider has been around since 1516 — that’s 506 years of trading. And while letter volumes have been in steep decline, enormous growth in online shopping has powered Royal Mail deliveries to new heights. That’s why I see the group as a potential bargain buy, rather than a value trap.
At the current share price of 352.1p, the shares trade on a price-to-earnings ratio of just over four and an earnings yield of 24.8%. What’s more, the dividend yield is above 4.7% — around 1.2 times the FTSE 100’s cash yield. Despite the battering the shares have taken recently, I think they would fit nicely into my family’s income/value portfolio. Hence, I will shortly be buying RMG shares for their passive income and future recovery potential!