Metro Inc 2

I am continuing my review on Metro Inc (TSX-MRU.A) today, as I have received the annual report for September 2009 year end. The stock I currently hold I bought in August 2004 and I have made almost 18% total returns per year on this stock. However, my return on this stock for 2009 was just 7.5%. This stock is on the dividend lists that I follow of Dividend Achievers at www.indxis.com/DividendAchievers.html and Dividend Aristocrats list at www.tmxmoney.com/en/individual.html (see indices).

The first thing I always look at is Insider Selling and Insider Buying. For this company, there has been over the past year a whole whack of Insider Selling. It was done by officers of the company and it was high at some $39.9M. This is about 1% of the value of this company. This is a lot of selling. Also, officers of this company have been unloading their stock options. There has been a tiny bit of Insider Buying.

Next, I should talk about the spreadsheet ratios. First, I will deal with the P/E Ratio. This ratio at 11.5 is not far off the 5 year average low of 11.1. The 5 year average high is 15.6. The sites that base the P/E on the last 12 months earnings get a P/E of 12.2. The P/E is not particularly high or low. Next, I will deal with the Price/Book Value. The current P/BV is just less than 90% of the 10 year average. This is good. Also, the P/BV is just 1.8 and this is also not a bad ratio.

When I turn to the Dividend Yield, I find that the current yield is 1.41% and the 5 year average is 1.45%. There are not far off. What you would hope for is that the current yield is higher than the 5 year average and here it is not. The last thing I want to discuss is the Graham Price. The Graham Price for this stock is currently at $39.95, based on earning estimates for 2010. The current price is $39.01, which is just over 2% lower. When I bought this stock and did not well in it, the price I paid was also below the Graham price.

When I look at analysts recommendations, they vary from Strong Buys, to Buys, to Hold. However, the most recommendation is the Holds and this is the consensus recommendation. (See my site for information on analyst ratings.) I think that the problem some analysts see is that their 12 month target price is not far off the current price, so they do not expect too much in capital gains this year. As the dividend yield is so low, this means that the total gain will not be much either.

I think that I have done well in this stock because the stock’s price seems to be a bit cyclical and I bought it at low points. Currently the stock price is almost as high as it has ever been. It was just as high at present as it was in the early part of 2007. The stock price took at dive in the early part of 2008 and now it is back up again. I can see why there are a lot of Hold recommendations on this stock. Even though the P/E was not a lot different when I bought this stock, you got to wonder if the stock is not over priced.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of close to 600 food stores under the banners Metro, Metro Plus, Super C, A&P, Dominion, Loeb and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, The Pharmacy and Drug Basics. Metro's operations are concentrated in Quebec and Ontario. Its web site is www.metro.ca. See my spreadsheet at www.spbrunner.com/stocks/mru.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.