Q: Which one would you pick for a long term investment between Metro or Loblaw?
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5i Research Answer:
L has benefited from meaningful multiple expansion in recent years, which is justified by the significant improvement inoperational efficiency. We view L as an industry leader for now, while MRU’s results have been good, but not as solid as L.
MRU certainly has room for improvement and could make a similar move like L over the next few years, IF MRU can demonstrate a similar improvement in the company’s fundamentals, such as acceleration in topline growth, margin expansion, capital returns, etc. Otherwise, we think the prospective returns of the two would be similar from this point. For now, we would stick with the industry leader L.