METRO INC. $92 - Toronto symbol MRU

METRO INC. $92 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 84.5 million; Market cap: $7.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 250 drugstores in Quebec and Ontario.

In its 2014 fiscal year, which ended September 27, 2014, Metro’s earnings rose slightly, to $460.9 million from $460.7 million in fiscal 2013. The company spent $459.7 million on share buybacks in the past year, which is why its earnings per share gained 8.5%, to $5.13 from $4.73.

Overall sales rose 1.7%, to $11.6 billion from $11.4 billion, while same-store sales gained 1.1%. Higher food prices were the main reason for these gains. As well, the company recently paid $101.6 million for 75% of privately held bakery Première Moisson, which has 23 stores and three production facilities in Quebec.

In 2013, Metro sold about half of its stake in Alimentation Couche-Tard (Toronto symbol ATD.B), which operates convenience stores in North America and Norway and is a recommendation of Stock Pickers Digest, our newsletter for aggressive investing. Even so, Metro’s share of Couche-Tard’s earnings fell just 2.0% in fiscal 2014, to $49.8 million from $50.8 million.

Metro is in a strong position to keep making acquisitions and buying back shares. Its long-term debt of $1.0 billion is a low 13% of its market cap, and it holds cash of $36.0 million.

The stock is up 40% in the past year, but it still trades at a moderate 15.9 times the $5.77 a share that Metro will probably earn in fiscal 2015. The $1.20 dividend yields 1.3%.

Metro is a buy.

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