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Marston's looks too cheap

The valuation of Marston's shares is at credit-crunch levels, but is the outlook really that dire?
October 11, 2017

A lacklustre trading update following a wet summer was the latest gloomy news to come from Marston’s (MARS) earlier this week. But, while the pub company will undeniably suffer from any Brexit-related economic slowdown, can this really justify an equity valuation on a par with early 2010, based on price/earnings, price-to-sales and dividend yield? Back in 2010, as the market struggled back from the worst sell-off in the past 30 years, the economic pain was extremely real and there were doubts about the very viability of the financial system.

IC TIP: Buy at 107p

We think the market may have gotten ahead of itself in pricing in woe. Indeed, for its part, Marston’s is looking to make £5m of cost savings and remain disciplined on pricing to keep margins up next year, while also slightly scaling back planned openings (15 pubs and six lodges from 20 and 10). That's hardly preparing for Armageddon.