I own this stock of Metro Inc (TSX-MRU, OTC-MTRAF). I was following this stock before I bought it because it was on Mike Higgs' Canadian Dividend Growth stock list and on the other dividend lists that I was following.
When I was updating my spreadsheet, I noticed Earnings were very high for 2018. This is because of disposal of assets. The Goodwill and Intangible Assets grew 163.09% during the past year due to the company buying Jean Coutu Group. This stock has a financial year ending at the end of September each year.
The dividend yield is low with good growth. The current dividend is 1.52% with 5, 10 and historical median dividend yields at 1.47%, 1.57% and 1.45%. As you can see in the chart below, the dividend growth (per year) is in the good range (15% or higher). The only year lower is for the 15 year range and dividends grew at 14.82% per year which is close the good range.
The Dividend Payout Ratio for EPS for year ending in 2018, is 9.81% with 5 year coverage at 17.07%. It is expected to be at 23% in 2019, which is a more normal value. The DPR for CFPS is 17.01% with 5 year coverage at 14.21%. They can certainly afford their dividends.
Debt Ratios are fine for this company. Debt/Market Cap Ratio is good for 2018. Long Term Debt has expended by 82% and the ratio for 2018 is 0.26. This seems also due to the acquisition of Jean Coutu Group. The Liquidity Ratio for 2018 are acceptable at 1.17 but if you add in cash flow after dividends it is 1.52. The corresponding 5 year medians are 1.11 and 1.52. The Debt Ratio is good at 2.07 with 5 year median at 1.97. The Leverage and Debt/Equity Ratios are good at 1.93 and 0.93.
The Total Return per year is shown below for years of 5 to 26 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 16.91% | 18.74% | 16.96% | 1.78% |
| 10 | 15.71% | 15.98% | 14.40% | 1.58% |
| 15 | 14.82% | 14.76% | 13.27% | 1.48% |
| 20 | 16.32% | 16.00% | 14.44% | 1.56% |
| 25 | 20.31% | 18.77% | 16.97% | 1.80% |
| 26 | 18.78% | 17.05% | 1.73% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.29, 15.50 and 18.32. The corresponding 10 year ratios are 10.38, 11.64 and 13.02. The historical ones are 10.01, 11.62 and 14.58. The current P/E Ratio 14.98 based on current stock price of $47.34 and 2019 EPS of 3.16. This stock price is probably reasonable, but maybe a bit high.
I get a Graham Price of $39.57. The 10 year low, median, and high median Price/Graham Price Ratios are 0.88, 0.98 and 1.09. The current P/GP Ratio is 1.20 based on a current stock price of $47.34. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.06. The current P/B Ratio is 2.13 based on a stock price of $47.34, Book Value of $5,643M and Book Value per Share of $22.02. The current P/B Ratio is 4% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.45% and a 5 year median of 1.46%. The current yield is 1.52% based on a stock price of $47.34 and dividends of $0.72. The current yield is 4.9% above the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.51. The current P/S Ratio is 0.73 based on 2019 Revenue estimate of $16,599M, Revenue per Share of $64.78 and a stock price of $47.34. The current P/S Ratio is some 43% above the current ratio. This stock price testing suggests that the stock price is relatively expensive.
The testing is a mixed bag. My favourite test on yield says that the stock price is relatively reasonable. But interestingly the P/S Ratio test show the company to be expensive. This cannot be ignored. If you look at the last three years of Revenue estimates to Revenue, it is a mixed bag with the estimates of 2016 right on and the ones for 2015 and 2017 off the mark.
In the chart below shows the estimates for Revenue and the results. In 2015 the 2016 Revenue estimate was $12,578M. The revenue came in at 12,788M. In 2016 the 2017 estimate was $13,175M and Revenue came in at $13,175M. In 2017 the 2018 estimate was $14,531M and Revenues came in at $13,383.
| Year | Revenue | Revenue | Revenue |
|---|---|---|---|
| 2016-2018 | $12,788 | $13,175 | $13,383 |
| Year | Estimates | Estimates | Estimates |
| 2018-2020 | $14,531 | $16,697 | $16,964 |
| 2017-2019 | $13,175 | $13,658 | $13,696 |
| 2016-2018 | $12,578 | $12,991 | $13,171 |
| Year | Estimate | Revenue | Difference |
| 2017 | $14,531 | $13,383 | -7.90% |
| 2016 | $13,175 | $13,175 | 0.00% |
| 2015 | $12,578 | $12,788 | 1.67% |
When I look at analysts’ recommendations, I find Buy (5) and Hold (7) recommendations. The consensus would be a Hold. The 12 month stock price is $47.23. This implies a total return of 1.29% with a capital loss of 0.23% and dividends of 1.52% based on a current stock price of $47.34.
Kevin Zeng on Simply Wall Street says this company is slightly undervalued. Edwin Gilmore on Bharata Press says there is a consensus of Buy for this stock from seven brokerages. Olga on Thorold News says shorted shares decreased by 1.89% to 0.36% of outstanding shares. Demetris Afxentiou on Motley Fool thinks this is a good defensive stock. See what analysts are saying about this company on Stock Chase. Most analysts like the stock, but some do not. Some consider it a defensive stock.
As a retailer, franchisor, distributor, and manufacturer, Metro Inc operates or services a network of more than 600 food stores under several banners including Metro, Metro Plus, Super C and Food Basics, as well as of more than 650 drugstores primarily under the Jean Coutu, Brunet, Metro Pharmacy and Drug Basics banners. Its web site is here Metro Inc.
The last stock I wrote about was about was Element Fleet Management Corp (TSX- ENF, OTC-ELEEF) ... learn more. The next stock I will write about will be Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more on Friday, January 4, 2019 around 5 pm. Today on my other blog I will write about Dividend Stocks January 2019.... learn more. Tomorrow on my other blog I will write about Something to Buy January 2019.... learn more.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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