Is it a good company at a reasonable price? I certainly think it is a good company. Grocery stores, tend to do a steady business no matter what is happening in the economy. I have done very well with this stock. The price is probably currently just into the expensive zone.
I own this stock of Metro Inc (TSX-MRU, OTC-MTRAF). I bought this stock first at the end of 2001 because it is a good time to purchase as market is relatively low and Metro was on my hit list. I brought this stock in 2004 as I was looking for something I already own, that has increasing dividends and reasonable P/E for stock at this time. By 2009, Metro stock was over 10% of my portfolio because it had grown so strong, so I sold some to reduce the percentage of it in my portfolio.
The financial year ends for this stock on September 30 each year, so I am reviewing the financial year of September 30, 2022.
When I was updating my spreadsheet, I noticed that in the last 5 and 10 year periods, dividends have grown faster than both Revenue and Cash Flow. Dividend growth will probably be lower in the future.
| Year | Item | Growth |
|---|---|---|
| 5 | Revenue Growth | 43.37% |
| 5 | AEPS Growth | 65.37% |
| 5 | Net Income Growth | 43.32% |
| 5 | Cash Flow Growth | 63.61% |
| 5 | Dividend Growth | 71.31% |
| 5 | Stock Price Growth | 57.49% |
| 10 | Revenue Growth | 57.27% |
| 10 | AEPS Growth | 151.87% |
| 10 | Net Income Growth | 76.01% |
| 10 | Cash Flow Growth | 108.58% |
| 10 | Dividend Growth | 295.71% |
| 10 | Stock Price Growth | 247.16% |
If you had invested in this company in December 2012, for $1,013.28 you would have bought 48 shares at $21.11 per share. In December 2022, after 10 years you would have received $322.89 in dividends. The stock would be worth $3,598.56. Your total return would have been $3,921.45.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $21.11 | $1,013.28 | 48 | 10 | $322.89 | $3,598.56 | $3,921.45 |
If you had invested in this company in December 1992, for $1,000.14 you would have bought 1266 shares at $0.79 per share. In December 2022, after 30 years you would have received $11,035.64 in dividends. The stock would be worth $94,912.02. Your total return would have been $105,947.66.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $0.79 | $1,000.14 | 1,266 | 30 | $11,035.64 | $94,912.02 | $105,947.66 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.47%. The 5, 10 and historical median dividend yields are also low at 1.60%, 1.56% and 1.47%. The dividend growth is moderate (8% to 14% ranges) at 11.37% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 31% with 5 year coverage at 22%. The DPR for Adjusted Earnings per Share (AEPS) is 28% with 5 year coverage also at 28%. The DPR for Cash Flow per Share (CFPS) is 14% with 5 year coverage also at 14%. The DPR for Free Cash Flow (FCF) is 31% with 5 year coverage at 30%. (There is no agreement on what the FCF is, but they are close.)
Debt Ratios are fine. The Long Term Debt/Market Cap for 2022 is 0.15 and is good and low. The Liquidity Ratio for 2022 is low at 1.12, but add in Cash Flow after dividends and it is good at 1.65. The Debt Ratio for 2022 is good at 1.98. The Leverage and Debt/Equity Ratios are fine at 2.02 and 1.02.
The Total Return per year is shown below for years of 5 to 32 to the end of 2022. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 11.37% | 14.94% | 13.25% | 1.68% |
| 2012 | 10 | 14.75% | 15.19% | 13.51% | 1.82% |
| 2007 | 15 | 14.03% | 17.19% | 15.37% | 1.63% |
| 2002 | 20 | 14.63% | 15.14% | 13.54% | 1.65% |
| 1997 | 25 | 16.24% | 16.31% | 14.60% | 1.69% |
| 1992 | 30 | 18.92% | 18.24% | 16.39% | 2.13% |
| 1990 | 32 | 21.91% | 19.36% | 2.70% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.86, 17.73, 20.46. The corresponding 10 year ratios are 14.58, 17.11 and 19.15. The corresponding historical ratios are 11.97, 12.28 and 15.87. The current P/E Ratio is 20.10 based on a stock price of $74.97 and EPS estimate for 2023 of $3.73. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
The company also supplies Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 15.36, 17.21 and 19.21. The corresponding 10 year ratios are 15.20, 17.19 and 19.09. The current P/AEPS Ratio is 17.81 based on a stock price of $74.97 and AEPS estimate for 2023 of $4.21. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $51.39. The 10-year low, median, and high median Price/Graham Price Ratios are 1.14, 1.33 and 1.51. The current P/GP Ratio is 1.46 based on a stock price of $74.97. This ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Book Value per Share Ratio of 2.29. The current P/B Ratio is 2.69 based on a Book Value of $6,605M, Book Value per Share of $27.88 and a stock price of $74.97. The current ratio is 17% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 12.16. The current P/CF Ratio is 17.98 based on a Cash Flow per Share estimate for 2023 of $4.17, Cash Flow of $988M and a stock price of $74.97. The current ratio is 48% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive the median. The Cash Flow per Share for the last 5 years were $2.93, $2.70, $5.88, $6.51, and $6.17. Analysts expect a drop in Cash Flow of 32% between 2022 and 2023.
I get an historical median dividend yield of 1.47%. The current ratio is 1.47% based on a stock price of $74.97 and dividends of $1.10. The current dividend yield is the same as the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median dividend yield of 1.46%. The current ratio is 1.47% based on a stock price of $74.97 and dividends of $1.10. The current dividend yield is 6% below 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.75. The current P/S Ratio is 0.91 based on Revenue estimate for 2023 of $19,586M, Revenue per Share of $82.67. The current ratio is 20.1% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably on the expensive side. The dividend yield tests say it is reasonable with the dividend yield test saying it is above the median. The P/S Ratio test shows that the stock price is just into the expensive region.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (1), Hold (8), Underperform (1). The consensus is a Hold. The 12 month stock price is $76.18. This implies a total return of 3.08% with 1.61% from capital gains and 1.47% from dividends based on a current stock price of $74.97.
Some analyst on Stock Chase like this stock and some do not. Stock Chase gives this stock 4 stars out of 5. It is on Money Sense List with a C rating. Jed Lloren on Motley Fool talks about groceries stores being good in all economic climates. Joey Frenette on Motley Fool thinks this company is still selling at a fair price. Metro put out a press release on Newswire about their annual 2022 results. Simply Wall Street Via Yahoo Finance talks about Metro missing the EPS estimate. Simply Wall Street gives this stock 3 stars out of 5. It detects no risks.
Metro is one of the largest grocery retailers in Canada. It utilizes an array of business models, but it most frequently acts as either a retailer, operating individual stores, or a franchiser, licensing its trademarks and supplying merchandise to franchisees. The preponderance of its operations is in Quebec, which houses over 70% of its owned and franchised food and drug outlets. Its web site is here Metro Inc.
The last stock I wrote about was about was Agnico Eagle Mines Ltd (TSX-AEM, NYSE-AEM) ... learn more. The next stock I will write about will be Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more on Wednesday, January 4, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks January 2023.... learn more on January 3, 2023 around 5 pm.
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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