Royal Mail float: should private investors buy the shares? The Share Centre will accept applications in the Royal Mail flotation until October 8. Carl Lamb of Almary Green, a financial adviser, said: "I would certainly recommend buying Royal Mail shares as part of a diversified portfolio." He said the shares made an "ideal holding" for pension savers with self-invested personal pensions (Sipps) or small self-administered schemes (SSASs). Danny Cox of Hargreaves Lansdown said Royal Mail was well placed to benefit from the growth in online shopping. He added that the company had undergone a programme of transformation since 2008 focused on enabling it to deliver letters and parcels more efficiently and adapting the network so that it could carry more parcels. "Further efficiency measures and streamlining could increase profits," he said. But he added that Royal Mail also faced challenges, including a continued decline in letter volumes, the costs of the "one price goes anywhere" service, the possibility of industrial action and the need to invest in the replacement of ageing infrastructure. Once the flotation has taken place you will of course be able to buy the shares on the market like any other quoted company. The risk is that the price rises immediately - the offer price is often chosen deliberately to make this likely - and that you therefore pay more. There is more information about the Royal Mail share offer at royalmailshares.service.gov.uk. Quick facts about Royal Mail shares Revenue (March 31) £9.3bn Adjusted operating profit Market capitalisation £2.6bn to £3.3bn Share price P/E ratio 6.5 to 8.3 Expected dividend yield 6.1pc to 7.7pc Dividend cover Two times Interest cover Four times Net debt (31 March) Net assets £1.4bn Leverage The numbers explained: Revenue (31 March) £9.3bn Adjusted operating profit (31 March) £403m These two figures taken together (the proportion of sales income that is retained as profit) imply an operating profit margin of 4.3pc - a relatively healthy figure, although it does not allow for the cost of investing for the future. Market capitalisation of £2.6bn to £3.3bn This is the size of the company. The top end of the range would make it almost big enough to enter the FTSE 100 but it will more likely site in the FTSE 250 index of medium-sized companies. The next review of the indices is in December, when changes are made. Share price 260p to 330p A wide range. Some investors may be tempted to buy at the lower figure but not the higher one, where the valuation becomes more testing. P/E ratio 6.5 to 8.3 The price to earnings ratio is widely used comparison of the shares price and earnings per share. The lower the ratio, the cheaper the share. The lower 6.5 figure is certainly in bargain territory, as long as investors believe that profits are sustainable. Even at 8.3 times earnings - which will apply if the shares are priced at the top of their range - the shares would be far from expensive. The average p/e ratio of the FTSE 100 is 15, although the company is anticipated to be low growth, somewhat justifying such a valuation. Expected dividend yield 6.1pc to 7.7pc Also attractive figures. A yield of almost 8pc is very attractive to savers when cash deposits earn 3pc at best. Few blue chip companies yield even 6pc. Again, the key thing is the sustainably of profits to support the dividend. Dividend cover two times This is degree to which the dividend is exceeded by profits. In this case Royal Mail could double its dividend and still meet the payments from its earnings, although that would leave nothing for investment. Paying half of your profits to shareholders - in other words, dividend cover of two - is widely seen as a sensible and sustainable balance. Interest cover four times This shows that the company's debts are affordable and do not threaten to swamp its ability to pay dividends to shareholders. Net debt (31 March) £906m, Net assets (31 March) £1.4bn Debt is a relatively low figure - 65pc - relative to sales, profits and assets.