Tesco is known to many US investors. In this analysis I will attempt to outline the key dynamics of this company and demonstrate why I consider it to be an excellent investment at the current market price. Readers should be aware that I have been a shareholder in Tesco PLC since 2006. In addition, since this analysis has been written for the Gurufocus value ideas competition there may be some unconscious element of positive bias, even though I have attempted to be objective. Therefore I would strongly advise investors to do their own further research before investing in this company.

Tesco is listed on the London Stock Exchange, stock code TSCO, and is also available on the US market as an ADR, stock code TSCDY. At the time of writing this article the share price in London was 395 pence and $19.59 for the ADR in the US.

The Business

Tesco PLC is the largest retailer in the UK and its core business is large format stores for food and other convenience items. In addition the company offers telecoms services such as mobile and broadband to UK customers as well as financial services including household and car insurance, personal loans and credit cards. In 2009/2010 the company achieved 31% of total sales in international markets. The market cap is 31.7 billion pounds (US$51.83 billion) and Tesco is now the world's third largest retailer behind Wal-Mart (first) and Carrefour of France. In the UK it has been reported that one out of every eight pounds spent in retail stores is spent at Tesco.

Quality of earnings

I would consider earnings quality to reflect the predictability, reliability and sustainability of future growth in earnings. In the case of Tesco, this is a company that largely sells consumer staples. In times of recession, although earnings may be affected, as during this last recession, the company is robust enough to sail through with only a