Metcash (MTS) offers the strongest value of the three major supermarkets trading on 13.1x forward earnings, roughly half Coles (COL) and Woolworths’ (WOW) multiples, with FY27 sales growth remaining positive across Food, Liquor and Hardware business, although weaker hardware margins, tobacco headwinds and cost inflation continue to pressure earnings. Woolworths looks most vulnerable to disappointment given its premium valuation, and with COL and WOW trading well above their five-year average valuations and MTS at a discount, we see the greatest valuation upside from the supermarkets via Metcash, supported by its 5.7% fully franked yield.
- We like MTS as a conservative, valuation & yield-supported play for an improvement by the local consumer. We hold the stock in the Income Portfolio.
MM is long and bullish on MTS for income
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