Core Viewpoint - Tesco's share price has reached a decade high, alongside its UK market share, raising questions about potential upside based on fair value [2] Group 1: Market Performance - Tesco's share price previously dropped by 15.3% due to concerns over ASDA's aggressive pricing strategies, but those who invested at the low have seen a 34.8% gain in less than four months, outperforming FTSE 100 and S&P 500 [3] - Tesco has gained 0.8% in UK market share this year, while ASDA has lost 0.9%, with Tesco's sales increasing by 7.4%, nearly double the market's growth of 4.0% [5] Group 2: Competitive Landscape - ASDA's price rollbacks have largely affected non-core items, which do not significantly impact consumer price perception, and many promotions have been shorter than expected [7] - Tesco has focused on enhancing the overall shopping experience, including better packaging, store retrofits, and a rewarding loyalty scheme, areas where ASDA has not performed as well [8] Group 3: Financial Projections - Tesco's EBIT for FY26 is projected at £3.12 billion, a smaller decline than the market consensus of £2.96 billion, which reflects a 5.2% drop from the previous year [9] - Tesco's market share gains are expected to continue, with consumers trading up to branded goods, which may lead to margin-accretive own-brand sales [14] Group 4: Economic Factors - Grocery inflation appears to have peaked, with recent price increases driven more by labor costs than food supply issues, indicating potential for stabilization in pricing [15] - Tesco's estimated EBIT margin for FY26 is projected at 4.28%, slightly above the market consensus of 4.10%, contingent on no further economic shocks [16] Group 5: Share Buyback and EPS Growth - Tesco is anticipated to complete its £1.45 billion share buyback program ahead of schedule, which could positively impact EPS [17] - The company is projected to achieve a CAGR of 10.65% through FY28, with EPS expected to reach 35.09p, driven by market share gains and increased basket sizes [18] Group 6: Valuation Perspective - Tesco's current PEG ratio is 1.5, close to the sector average of 1.6, and its forward P/E ratio of 13.6 aligns with the comparable average of 14.6, suggesting limited upside potential [21] - Despite a strong performance, Tesco's stock is considered fairly priced, with a fair value target of 440p, indicating that further upside will require stronger market share gains [22]