Up by 14.27%: Is Loblaw Stock a Good Buy Right Now?

Loblaw stock is up by 14.27% from its 52-week lows in May 2023, but it might be worth waiting on the sidelines before you invest.

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Amid all the uncertainty, it can be difficult to identify stocks you can invest in to keep your capital safe in the stock market. However, there are pockets across several segments of the economy that can continue to do well. As one of the largest players in the Canadian retail sector, Loblaw Companies (TSX:L) can be one such stock.

As of this writing, Loblaw stock trades for $120.64 per share. At current levels, it is up by 14.27% from its 52-week low and 5.62% since March 21, 2023. While the $38.49 billion market capitalization grocery stock is up this year, there might be a few things you should consider before establishing a position in Loblaw stock. Today, we will take a closer look at what is happening.

The latest developments for Loblaw stock

The last few weeks have seen several announcements that led to the surge in Loblaw stock share prices in the market. One of the biggest news was that the company is in the works to invest $2 billion in expanding the business this year.

The expenditure will allow the company to not just grow its presence but also improve its existing locations. The process may involve opening almost 40 new or relocated stores, alongside conversion for 600 existing locations.

Loblaw stock made the announcement in its recent-most quarterly report, further adding that it will sell some of its excess real estate portfolio to fund its capital investment program.

Another major development comes through the announcement of a new president and chief executive officer (CEO) for the company. According to 52.6% shareholder George Weston, the new president, Per Bank, will replace Gale Weston potentially by the first quarter (Q1) of fiscal 2023.

Partnerships and other developments

The recent announcements have been good for investor sentiments, but that is not the only thing Loblaw stock has going for itself. The company bought Shoppers Drug Mart almost a decade ago. It also has the PC Optimum Loyalty and financial services business under its belt. It also partners with Esso locations to collect President’s Choice rewards.

Yet while its shares are up by 14.27% in the last 12 months, Loblaw stock is down by 6.23% from its share price at the start of May 2023. At current levels, Loblaw stock trades at a trailing 21.67 price-to-earnings ratio, which seems a fair valuation and offers its shareholder dividends at a 1.48% dividend yield.

Foolish takeaway

Considering its fair valuation and relatively low-yielding dividends, Loblaw stock might not be the asset to buy for immediate and stellar wealth growth. It remains to be seen how a full-blown recession might impact Loblaw stock.

With a recession slated to hit the Canadian economy in the summer, it might be a better idea to wait on the sidelines to see how the situation changes. However, long-term investors who already have a position in the stock might want to hold onto their shares. The company is unlikely to go anywhere. Even if a recession leads to its prices dropping, it is well positioned to recover.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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