Record the sale but its share price does not move. Is 'Spoons' now a value stock?

As its price drops by 9% from the beginning of 2024, JD Wetherspoon (LSE:JDW) may be considered a value stock.

However, on 4 October, after reporting record-breaking revenues of £2.04bn for the year ended 28 July 2024 (FY24) – and a rise in adjusted earnings per share of 77%, compared to FY23 – the stock price has not been shaken .

Investors seem to think the pub chain is reasonably priced. Are they right? Let's take a look.

Cheers Tim!

After reporting such impressive growth, I thought the company's directors would be very happy. Instead of celebrating the restoration of the budget after a six-year absence, and growth in both revenue and income, I felt that the press release was a bit of a letdown.

For example, I find it strange that in the second line of the Chairman's statement, Tim Martin wrote: “The company remains concerned about the possibility of further road closures and the effectiveness of the government's investigation into the outbreak, which will not be completed for several years. “

This seems like a sad statement to make so early in his words.

Perhaps this explains the market's muted response to the results – its share price closed up 0.76%.

Politics on the board

But the Wetherspoon chairman has never been afraid to talk about politics.

In the 2016 annual report he explained that “The Brexit decision was not a protest vote – it was a rejection of the party and the elite's enthusiasm for unreal things.“. As a prominent campaigner during the referendum, he suggested that the British economy would do much better outside the European Union.

Unfortunately, during this period the pub chain's financial performance declined slightly.

In FY24, adjusted profit before tax was £73.9m, compared to £80.6m, in FY16. And adjusted earnings per share were lower in FY24 (46.8p) than in FY16 (48.3p). Free income has also gone in the wrong direction.

Of course, Covid struck at this time and the government ordered the closure of the tourism industry. Remind everyone that you never know what's around the corner.

Apparently, it's still playing on Tim Martin's mind.

What am I thinking?

Although the company's share price is up 12% since October 2023, Wetherspoon doesn't sound like a value stock to me.

The company reckons it has the potential to open another 1,000 pubs in the UK – it currently operates 800. However, the industry seems to be collapsing. About 50 licensed venues close their doors every month. And more than 2,000 pubs have closed in the last 20 years.

With less alcohol consumption and more people drinking at home, British pubs seem to be in decline. And the government's Minister of Public Health has indicated (and then denied) that they may look at the opening hours of the country's bottles.

Analysts expect earnings per share of 52.14p in FY25.

If achieved, it will represent an 11% growth. But the company's forward price average is currently 14, broadly in line with the 10-year average. This suggests that the stock is not in the bargain zone.

In fact, it makes me think that pub chain shares are very valuable at the moment. I think there are better opportunities for me elsewhere.