Topics Value Stocks

Leon’s Furniture Ltd. $15.92 - Toronto symbol LNF

LEON’S FURNITURE LTD. $15.92 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 71.8 million; Market cap: $1.2 billion; Dividend yield: 2.5%) steadily increased the number of stores under its name from 27 in 2003 to today’s 79.

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 June 30, 2016, Leon’s sales rose 4.7%, to $516.2 million from $492.9 million a year earlier. On a same-store basis, sales gained 4.1%. More-effective promotions led to that increase.

The company earned $17.0 million, or $0.24 a share, in the quarter. That’s an increase of 13.1% from $15.0 million, or $0.21, a year earlier. 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 15.2 times this year’s forecast earnings of $1.05 a share. The shares yield 2.5%.

Leon’s is a buy.

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