Monro’s stock price has taken a beating over the past six months, shedding 41.7% of its value and falling to $15 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Monro, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Monro Will Underperform?
Even though the stock has become cheaper, we're cautious about Monro. Here are three reasons why MNRO doesn't excite us and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales show the change in sales for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
Monro’s demand has been shrinking over the last two years as its same-store sales have averaged 3.3% annual declines.
2. Fewer Distribution Channels Limit its Ceiling
With $1.20 billion in revenue over the past 12 months, Monro is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Monro’s full-year EPS dropped 198%, or 24.4% annually, over the last five years. In a mature sector such as consumer retail, we tend to steer our readers away from companies with falling EPS because it could imply changing secular trends and preferences. If the tide turns unexpectedly, Monro’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Monro, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 17.9× forward P/E (or $15 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find better investment opportunities elsewhere. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
Stocks We Would Buy Instead of Monro
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
