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What an exciting few weeks it’s been for shareholders of Royal Mail Group (LSE: RMG). After falling steeply from June to October, the Royal Mail share price has staged a serious comeback over the past few weeks. Indeed, their recent surge has sent Royal Mail shares to second place among the FTSE 100 index’s winners over the past month.
The Royal Mail share price bounces back
The Royal Mail share price has been an incredible performer since its 2020 lows. On 3 April 2020, during the first stage of the Covid-19 crisis, RMG closed at 124.3p. Thus, it had crashed by more than four-fifths (-80.3%) from its record high in May 2018. However, the stock has exploded since then, more than quadrupling (+318.5%). Wow.
Over the past 12 months, the Royal Mail share price has skyrocketed by more than three-quarters, rising 75.2%. It’s also up by more than half (+54.0%) in 2021. Then again, it has lost 5.4% over the past six months, having hit its 2021 peak in early June. On 7 June, Royal Mail shares hit their 2021 intra-day high of 613.8p. The following day, the stock hit its 2021 closing high of 606.4p. That put it within 25p of its all-time closing high of 631p, set on 11 May 2018.
However, over the next four months, the stock went into steep decline. On 6 October, it closed at 404.1p. Thus, in four months, RMG lost exactly a third (-33.3%) of its value. Barely two weeks later, I saw that this widely held and popular stock had plunged in a summer slump. Therefore, on 21 October, I said, “I’d be a willing buyer at the current Royal Mail share price…I’d then cross my fingers and hope for exceptional profits for RMG from a ‘Santa boom’”
Would I buy RMG at the current share price?
Royal Mail shares have soared since I wrote that they were a bargain 31 days ago. As I write, the RMG share price stands at 520.2p, having leapt by almost a quarter (+23.9%) over the past month. What’s more, since the low of 4 October, the stock has soared by 28.7%, making it a star performer within the FTSE 100. Even over the past five days, RMG has gained almost a sixth (+16.6%). That’s an outstanding performance over just one week for a ‘boring’ Footsie stock.
Of course, the Royal Mail is a British institution, having been founded 505 years ago by King Henry VIII in 1516. But longevity is no guarantee of success in this modern age of rampant capitalism. Remember high-street stalwart Woolworths, which collapsed in December 2008 after nearly a century in business? However, the UK’s universal postal service provider is racing to modernise in this age of digital communications. Thus, while letter deliveries are in long-term decline, parcel delivery and online shopping have given Royal Mail a powerful shot in the arm.
At the current share price, RMG trades on a lowly rating of 5.9 times earnings and a bumper earnings yield of 16.9%. Also, the stock offers a cash dividend yield of 3.2% a year (almost one percentage point below the FTSE 100’s 4.1%). I don’t own RMG today, but I’d happily buy the entire group at its current market valuation of £5.2bn. Hence, I would also buy Royal Mail stock at the current share price. I’d then hope for bumper profits from Christmas deliveries!
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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
