Brokers are feeling bullish about Metcash…
The post Bullish brokers drive Metcash (ASX:MTS) share price to multi-year high appeared first on The Motley Fool Australia. –
The Metcash Limited (ASX: MTS) share price was a strong performer on Tuesday.
The wholesale distributor’s shares jumped 6% to a multi-year high of $3.92 before closing the day at $3.90.
This means the Metcash share price is now up an impressive 43% over the last 12 months.
Why did the Metcash share price race higher?
Investors were bidding the Metcash share price higher today after brokers responded positively to yesterday’s full year results release.
In case you missed it, on Monday the company reported a 9.9% increase in revenue to $14.3 billion and a 27.1% jump in underlying profit after tax to $252.7 million. This allowed Metcash to increase its full year fully franked dividend by 40% to 17.5 cents per share and announce a $175 million share buyback.
What did brokers say?
A number of brokers have responded to the results release and have suggested that the Metcash share price is in the buy zone. One of those is Goldman Sachs, which retained its buy rating and lifted its price target to $3.97.
Commenting on the result, Goldman said: “MTS produced a strong performance in FY21 with Revenue growth of 10.1% (despite annualisation of customer losses in Food) and EBIT growth of 19.9%, reflecting the company’s exposure to COVID driven categories and solid execution.”
And while the broker notes that its Food business disappointed by failing to demonstrate operating leverage over the period, it highlights that the Metcash thesis remains a good one. This is thanks largely to its Hardware business.
The broker explained: “While we have pulled back expectations for Food earnings, Hardware has been revised up as Total Tools earnings annualise into FY22 and store rollout accelerates. Overall, we revise group EBIT forecasts by +1.9% and +1.8% respectively over FY22e and FY23e. Underlying NPAT is revised by +0.8%. We are forecasting a three year EBIT CAGR of 3.4% for MTS, with Hardware at 8.7%, driving ~90% of earnings growth out to FY24.”
What about the rest?
Elsewhere, analysts at Credit Suisse and Morgan Stanley are a touch more bullish than Goldman Sachs.
This morning Credit Suisse retained its outperform rating and lifted its price target to $4.16, whereas Morgan Stanley retained its overweight rating and increased its price target to $4.15.
This could mean that the Metcash share price still has a little further to run despite hitting a multi-year high today.
Should you invest $1,000 in Metcash right now?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.