Metro’s big acquisition cuts its risk

Article Excerpt

METRO INC. $48 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 255.7 million; Market cap: $12.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.5%; TSINetwork Rating: Average; www.metro.ca) operates 600 grocery stores and 650 drugstores, in Quebec, Ontario and New Brunswick. In May 2018, Metro acquired Jean Coutu Group (PJC) Inc. That firm operates 418 franchised drug stores in Quebec, New Brunswick and Ontario. It also makes generic pharmaceutical drugs through its Pro Doc business. The company paid $4.5 billion for Jean Coutu—75% in cash and 25% in Metro common shares. It is the largest acquisition in the company’s history. New operations drive sales, earnings gains As a result of the new operations, Metro’s sales rose 24.1%, from $11.6 billion in 2014 to $14.4 billion in 2018 (fiscal years ended September 30). Overall earnings gained 31.0%, from $451.8 million in 2014 to $591.7 million in 2017. Due to fewer shares outstanding, earnings per share jumped 50.3%, from $1.71 to $2.57. With the Jean Coutu purchase, Metro’s…

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