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Metro Inc MRU

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Stock XTSE Rating as of
CAD 72.33 +0.79 (1.10%)
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Company Report

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Metro Earnings: Ramp-Up of New Distribution Center on Track, Consumer Down-Trading Still a Headwind

Dan Su

We plan to maintain our CAD 69 fair value estimate for no-moat Metro after absorbing its second-quarter results, with sales up 2% and adjusted EPS down 5%. With the transition to the new Quebec distribution center progressing well, we are maintaining our 2024 projection for a 3% sales growth (on flattish volumes) and a 1% decline in adjusted EPS. Our 10-year forecast for low-single-digit top-line growth and an average operating margin of 6.5% remains in place, and we view shares as slightly undervalued.

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Price vs Fair Value

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MRU is trading at a 5% premium.
Price
CAD 72.33
Fair Value
CAD 29.00
Uncertainty
Low
1-Star Price
CAD 26.34
5-Star Price
CAD 14.40
Economic Moat
Jwvv
Capital Allocation
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Bulls Say, Bears Say

Bulls

Metro is well positioned to capture grocery shopping needs with various store formats, including full-price supermarkets, discounters, ethnic food stores, and bakeries and delis.

Bears

Given its smaller scale compared with grocery store rivals Loblaw and Sobeys, Metro has less bargaining power in procuring produce and packaged food products.

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Trading Information

Previous Close Price
CAD 71.54
Day Range
CAD 71.50–72.45
52-Week Range
CAD 65.43–78.88
Bid/Ask
CAD 71.96 / CAD 72.49
Market Cap
CAD 16.32 Bil
Volume/Avg
409,593 / 442,729

Key Statistics

Price/Earnings (Normalized)
16.81
Price/Sales
0.79
Dividend Yield (Trailing)
1.72%
Dividend Yield (Forward)
1.85%
Total Yield
4.93%

Company Profile

Metro is the third-largest grocery retailer in Canada (behind Loblaw and Sobeys) and also owns the top pharmacy chain in Quebec, Jean Coutu, following the 2018 acquisition. Its grocery banners include supermarket chain Metro, discounters Super C and Food Basics, and ethnic food grocer Adonis, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. Metro operates both as a food retailer and a franchisor, licensing its trademarks and supplying merchandise to registered pharmacists. The firm also acts as a wholesaler and distributor to serve smaller, neighborhood grocery stores. Unlike peers Loblaw and Sobeys that operate chain stores across Canada, Metro’s operations are concentrated in the provinces of Quebec and Ontario, with no presence in western Canada.
Sector
Consumer Defensive
Industry
Grocery Stores
Stock Style Box
Mid Core
Total Number of Employees
97,000
Website
https://www.metro.ca

Competitors

Valuation

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Metric
MRU
AMZN
COST
Price/Earnings (Normalized)
 16.8151.4349.66
Price/Book Value
 2.388.9415.89
Price/Sales
 0.793.331.33
Price/Cash Flow
 10.8718.5331.61
Price/Earnings
MRU
AMZN
COST

Financial Strength

Metric
MRU
AMZN
COST
Quick Ratio
 0.420.830.38
Current Ratio
 1.161.070.93
Interest Coverage
 9.2615.3550.15
Quick Ratio
MRU
AMZN
COST

Profitability

Metric
MRU
AMZN
COST
Return on Assets (Normalized)
 7.26%11.69%11.17%
Return on Equity (Normalized)
 14.83%31.44%32.34%
Return on Invested Capital (Normalized)
 9.92%17.95%22.17%
Return on Assets
MRU
AMZN
COST
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