Tesco PLC is the UKs largest supermarket chain owing 27.1% market share. Gains in the stock are slow, but could be good as a risk-off investment or hedge against inflatio

Tesco PLC an international supermarket chain with its main operations in the UK, but stores in Thailand, Japan, China, Poland and many other countries. As a result of the strength of Tesco, it is among the largest and most profitable supermarkets in the UK owning roughly 27.1% share, with Sainsbury's as its closest competitor at 15.3%, followed by Asda at 14.7%. As a stock, Tesco has been range-bound for quite some time therefore the outlook remains small. As a result of Tesco being the largest chain of supermarkets, growth is somewhat difficult in the UK, especially with rivals such as Aldi and Lidl appearing in recent years. Therefore, for Tesco to perform better, you have to look overseas and what expansion may be possible there.

From a financial aspect, Tesco is fine. The financial year for Tesco is Feb20-Feb21. Total market capitalisation sits at £17.4bn with 20/21 revenue at £57.8bn and a profit after tax £1.03bn. 19/20 figures are within 3% of that figure, so the company has not changed much in relation to the income statement. Looking at the balance sheet, total assets were £45.77bn with cash on hand £2.5bn, down a lot from  19/20 (£4.1bn). Total liabilities were £33.177bn, leaving Tesco net positive £12.3bn. This gave them an L/A ratio 72.4%. Which is marginally lower than Sainsbury's.

From a technical aspect, Tesco is mixed. The stock has been in a very slow upward trend since 2016 and COVID did have a slight impact, but ultimately Tesco is struggling, price action is poor and the stock is rangebound. MACD is negative with RSI is reading 44.9 suggesting fair value. It is a slow-moving stock, with support at £2.18, £2.08 and £2. A break below £2 could mean further downside, but this is unlikely. Looking at the upside initial resistance is £2.35, £2.48 followed by highs of £2.65. A break above here would be the confirmation for more upside.

Overall Tesco is mixed. Financials are good, the company is profitable and stable. It has a market monopoly on the UK market and operations are growing overseas, but slowly. The technicals don't give direction really. Support is below, resistance is above and it has been like that for almost 5 years now. Given its current price, if the high resistance is hit, it's an 18% increase, with a potential 10% decrease if the low support hit. As a result of this, the risk to reward is poor. It is not all bad though, as this stock is a secure stock as it has real value, Tesco could be seen as an alternative to Inflation risk. It will rise higher than inflation, but big gains are unlikely unless operations abroad speed up significantly.