Is It Still Safe To Buy Tesco PLC?

I'm always searching for shares that can help ordinary investors like you make money from the stock market. However, many people have been worried the market could be overheating -- with fears recently being realised.

So right now I'm analysing some of the most popular companies in the FTSE 100, hoping to establish if they can continue to outperform in today's uncertain economy.

Today I'm looking at supermarket giant Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) to determine whether the shares are still safe to buy at 334p.

So, how's business going?

Tesco has fallen out of favour with the market recently as investors worry that the company's £1 billion turnaround plan could be coming off the rails.

In particular, investors have expressed concern about the company's sliding sales here in the UK, which fell 1% on a like-for-like basis in the first quarter of this year.

Furthermore, the company's sales are declining internationally. On a like-for-like basis, sales in Asia fell 3.8% in the first quarter of this year, a fall that surprised the market as historically, Asia has been a region of strong growth for Tesco.

Having said all that, it is not all bad news. Tesco's financial arm, Tesco bank, registered a 4% increase in customer numbers during the first quarter of this year. In addition, the company's online sales of both food and non-food items, continue to expand and are now growing faster than any other part of the business.

Expected growth

For the last two years, Tesco's earnings have fallen; however, even though the company's sales are currently slowing, many City analysts expect Tesco to return to growth this year. City forecasts currently predict earnings of 32.9p per share for this year (4% growth) and 34.6p for 2015.

Shareholder returns

Many investors look to Tesco for its strong, well-covered dividend payout and it appears that despite the company's troubles, this payout will continue to grow. City forecasts predict payout growth of 3% to 15.2p per share for 2014 and 5% growth for 2015.

In addition, Tesco's dividend yield is currently 4.4% -- larger than that of its peers in the food & drug retailers sector, which currently offer an average dividend yield of 4.2%.

Valuation

Surprisingly, despite being the world's third-largest food retailer, behind supermarket giants Walmart and Carrefour, Tesco trades at a slight discount to its peers. Tesco currently trades at a historic P/E of 9.8, while its peers trade on an average historic P/E of around 9.9.

Foolish summary

So overall, based on Tesco's current discount to sector peers and stronger than average dividend yield, I believe that Tesco still looks safe to buy at 334p.

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In the meantime, please stay tuned for my next FTSE 100 verdict