LEON’S FURNITURE LTD. $15.30

LEON’S FURNITURE LTD. $15.30 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 71.6 million; Market cap: $1.1 billion; Dividend yield: 2.6%) steadily increased the number of stores under its name from 27 in 2003 to 80 today.

In March 2013, the company almost quadrupled in size with the $700 million purchase of its main rival, The Brick. That chain has 218 locations across Canada and continues to operate separately.

In the three months ended March 31, 2016, Leon’s sales rose 7.9%, to $463.5 million from $429.7 million a year earlier. On a same-store basis, sales gained 7.7%. More-effective promotions led to the increase in revenue.

Earnings in the quarter also jumped—89.0%, to $5.2 million, or $0.07 a share, from $2.7 million, or $0.04. The growth came mostly from the strong sales, but also from cost controls.

Leon’s took a risk with an acquisition as big as The Brick. But the integration has gone well, and the move enhances the company’s long-term prospects. The stock trades at 14.6 times this year’s forecast earnings of $1.05 a share. The shares yield 2.6%.

Leon’s is a buy.

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