Metcash (ASX:MTS) - Share price, News & Analysis

Q: What is the Fair Price of MTS when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

MTS (A$4.12) is trading below our estimate of [[fair value]] (A$7.01)

MTS fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	3/6
Past Performance	3/6
Financial Health	5/6
Dividends	3/6

MTS Stock Overview

Metcash Limited operates as a wholesale distribution and marketing company in Australia and New Zealand.

Rewards

Trading at 41.2% below our estimate of its fair value

Earnings are forecast to grow 6.2% per year

Earnings have grown 28.9% per year over the past 5 years

Risk Analysis

Unstable dividend track record

Metcash Competitors

GrainCorp

ASX:GNC

AU$1.8b

Endeavour Group

ASX:EDV

AU$14.6b

Coles Group

ASX:COL

AU$25.3b

United Natural Foods

NYSE:UNFI

US$2.8b

Price History & Performance

Summary of all time highs, changes and price drops for Metcash
Historical stock prices
Current Share Price	AU$4.12
52 Week High	AU$4.90
52 Week Low	AU$3.78
Beta	-0.11
1 Month Change	-1.91%
3 Month Change	-3.96%
1 Year Change	-2.60%
3 Year Change	42.07%
5 Year Change	58.46%
Change since IPO	176.51%

Recent News & Updates

Aug 05

These 4 Measures Indicate That Metcash (ASX:MTS) Is Using Debt Reasonably Well

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

Jun 30

Is There An Opportunity With Metcash Limited's (ASX:MTS) 38% Undervaluation?

In this article we are going to estimate the intrinsic value of Metcash Limited ( ASX:MTS ) by estimating the company's...

Shareholder Returns

	MTS	AU Consumer Retailing	AU Market
7D	-0.2%	1.6%	1.8%
1Y	-2.6%	-1.0%	-5.7%

Return vs Industry: MTS matched the Australian Consumer Retailing industry which returned -1.6% over the past year.

Return vs Market: MTS exceeded the Australian Market which returned -6.5% over the past year.

Price Volatility

Is MTS's price volatile compared to industry and market?
MTS volatility
MTS Average Weekly Movement	3.6%
Consumer Retailing Industry Average Movement	3.1%
Market Average Movement	10.6%
10% most volatile stocks in AU Market	17.7%
10% least volatile stocks in AU Market	4.6%

Stable Share Price: MTS is less volatile than 75% of Australian stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: MTS's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1920	8,000	Doug Jones	https://www.metcash.com

Metcash Limited operates as a wholesale distribution and marketing company in Australia and New Zealand. It operates through Food, Liquor, and Hardware segments. The Food segment distributes a range of products and services to independent supermarket and convenience retail outlets.

Metcash Fundamentals Summary

How do Metcash's earnings and revenue compare to its market cap?
MTS fundamental statistics
Market Cap	AU$3.98b
Earnings (TTM)	AU$245.40m
Revenue (TTM)	AU$15.16b

16.2x

P/E Ratio

0.3x

P/S Ratio

Is MTS overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
MTS income statement (TTM)
Revenue	AU$15.16b
Cost of Revenue	AU$13.51b
Gross Profit	AU$1.65b
Other Expenses	AU$1.41b
Earnings	AU$245.40m

Last Reported Earnings

Apr 30, 2022

Next Earnings Date

Dec 05, 2022

Earnings per share (EPS)	0.25
Gross Margin	10.89%
Net Profit Margin	1.62%
Debt/Equity Ratio	26.9%

How did MTS perform over the long term?

See historical performance and comparison

Dividends

5.3%

Current Dividend Yield

86%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is MTS undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for MTS?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for MTS. This is calculated by dividing MTS's market cap by their current preferred multiple.
What is MTS's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	AU$3.98b

MTS key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.3x
Enterprise Value/EBITDA	11.1x
PEG Ratio	2.6x

Price to Earnings Ratio vs Peers

How does MTS's PE Ratio compare to its peers?

MTS PE Ratio vs Peers

The above table shows the PE ratio for MTS vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	17.9x
GNC GrainCorp	5.4x	-50.5%	AU$1.8b
EDV Endeavour Group	30x	5.4%	AU$14.6b
COL Coles Group	25.5x	9.4%	AU$25.3b
UNFI United Natural Foods	11.1x	3.6%	US$2.8b
MTS Metcash	16.2x	6.2%	AU$4.0b

Price-To-Earnings vs Peers: MTS is good value based on its Price-To-Earnings Ratio (16.2x) compared to the peer average (17.9x).

Price to Earnings Ratio vs Industry

How does MTS's PE Ratio compare vs other companies in the Global Consumer Retailing Industry?

Price-To-Earnings vs Industry: MTS is expensive based on its Price-To-Earnings Ratio (16.2x) compared to the Global Consumer Retailing industry average (15.8x)

Price to Earnings Ratio vs Fair Ratio

What is MTS's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

MTS PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	16.2x
Fair PE Ratio	20.8x

Price-To-Earnings vs Fair Ratio: MTS is good value based on its Price-To-Earnings Ratio (16.2x) compared to the estimated Fair Price-To-Earnings Ratio (20.8x).

Share Price vs Fair Value

What is the Fair Price of MTS when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: MTS (A$4.12) is trading below our estimate of fair value (A$7.01)

Significantly Below Fair Value: MTS is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Metcash forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

6.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: MTS's forecast earnings growth (6.2% per year) is above the savings rate (1.8%).

Earnings vs Market: MTS's earnings (6.2% per year) are forecast to grow faster than the Australian market (6.1% per year).

High Growth Earnings: MTS's earnings are forecast to grow, but not significantly.

Revenue vs Market: MTS's revenue (2.6% per year) is forecast to grow slower than the Australian market (5.6% per year).

High Growth Revenue: MTS's revenue (2.6% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: MTS's Return on Equity is forecast to be high in 3 years time (23.6%)

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Past Performance

How has Metcash performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

28.9%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MTS has high quality earnings.

Growing Profit Margin: MTS's current net profit margins (1.6%) are lower than last year (1.7%).

Past Earnings Growth Analysis

Earnings Trend: MTS's earnings have grown significantly by 28.9% per year over the past 5 years.

Accelerating Growth: MTS's earnings growth over the past year (2.7%) is below its 5-year average (28.9% per year).

Earnings vs Industry: MTS earnings growth over the past year (2.7%) underperformed the Consumer Retailing industry 59.2%.

Return on Equity

High ROE: MTS's Return on Equity (22.7%) is considered high.

Discover strong past performing companies

Financial Health

How is Metcash's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: MTS's short term assets (A$3.0B) exceed its short term liabilities (A$2.7B).

Long Term Liabilities: MTS's short term assets (A$3.0B) exceed its long term liabilities (A$1.4B).

Debt to Equity History and Analysis

Debt Level: MTS's net debt to equity ratio (17.1%) is considered satisfactory.

Reducing Debt: MTS's debt to equity ratio has increased from 11.2% to 26.9% over the past 5 years.

Debt Coverage: MTS's debt is well covered by operating cash flow (147.2%).

Interest Coverage: MTS's interest payments on its debt are well covered by EBIT (9.9x coverage).

Balance Sheet

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Dividend

What is Metcash current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

5.34%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: MTS's dividend (5.34%) is higher than the bottom 25% of dividend payers in the Australian market (2.59%).

High Dividend: MTS's dividend (5.34%) is low compared to the top 25% of dividend payers in the Australian market (6.35%).

Stability and Growth of Payments

Stable Dividend: MTS's dividend payments have been volatile in the past 10 years.

Growing Dividend: MTS's dividend payments have fallen over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: At its current payout ratio (86.1%), MTS's payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (68.4%), MTS's dividend payments are covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

3.1yrs

Average management tenure

CEO

Doug Jones (50 yo)

0.50yr

Tenure

AU$2,229,515

Compensation

Mr. Douglas Jones, also known as Doug, serves as a Group CEO & Executive Director of Metcash Limited since March 11, 2022. He joined the Metcash Limited on February 01, 2022. He was Group Chief Executive O...

CEO Compensation Analysis

Compensation vs Market: Doug's total compensation ($USD1.57M) is about average for companies of similar size in the Australian market ($USD2.05M).

Compensation vs Earnings: Insufficient data to compare Doug's compensation with company performance.

Leadership Team

Experienced Management: MTS's management team is considered experienced (3.1 years average tenure).

Board Members

Experienced Board: MTS's board of directors are considered experienced (3 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/16 00:00
End of Day Share Price	2022/08/16 00:00
Earnings	2022/04/30
Annual Earnings	2022/04/30