After climbing over the long term, Metro (TSX:MRU) stock has pulled back roughly 14% from its 2025 highs. While a falling stock price does not automatically create a buying opportunity, Metro’s recent decline appears less like a sign of weakening fundamentals and more like a reset from an expensive valuation to a more reasonable one.
For long-term investors seeking stability, dependable earnings growth, and rising dividends, this Canadian defensive stock deserves renewed attention.
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A reliable business in any economy
Metro operates one of Canada’s strongest grocery and pharmacy networks, with a dominant presence in Ontario and Quebec. The company benefits from selling products consumers need regardless of economic conditions. Whether the economy is booming or slowing down, people still need groceries and prescriptions.
That resilience has translated into impressive long-term performance. Over the last 10 fiscal years, Metro has grown its adjusted earnings per share (EPS) at a compound annual growth rate of nearly 9%. Even more impressive, dividend growth has averaged roughly 12% annually during the same period.
Although the stock currently yields just 1.8%, income investors should not overlook its long-term potential. Metro’s payout ratio remains sustainable at approximately 32%, leaving plenty of room for future dividend increases with support from earnings growth. In other words, investors are not simply buying today’s yield — they are buying a dividend that has the capacity to keep growing for years (So far, its dividend growth streak is about 30 years.).
Solid results continue to support the investment case
Metro’s latest quarterly results reinforced the strength of the business. Fiscal second-quarter sales increased 4.1% year over year, supported by steady demand across both grocery and pharmacy operations. Same-store sales climbed 1.8% in food stores and 5.1% in pharmacy locations.
The company ultimately delivered adjusted EPS growth of 8.8%, a strong result for a mature defensive business.
Metro has also become increasingly shareholder-friendly through share repurchases. Over the last five years, the company has reduced its share count by more than 13%. Fewer shares outstanding increase each remaining shareholder’s ownership stake while also helping drive faster EPS growth over time.
This combination of steady sales growth, disciplined capital allocation, and ongoing buybacks creates a compelling formula for long-term wealth creation.
Why the recent pullback matters
At roughly $90 per share at writing, Metro trades around its long-term normal price-to-earnings (P/E) ratio of about 18. Analysts currently see the stock trading at about a 10% discount to the consensus price target, suggesting near-term upside potential of about 11.5%.
If Metro can continue growing EPS at around 8% annually — which appears achievable given its track record — investors could reasonably expect total long-term returns near 10% per year when dividends are included.
Importantly, Metro’s defensive qualities may become even more valuable during periods of economic uncertainty. Consumers often cut discretionary spending in tougher times, but grocery demand remains durable. In fact, many households cook more meals at home during recessions to save money, which can further support grocery sales.
Investor takeaway
Metro stock’s recent 14% decline has created an opportunity for patient investors to consider a high-quality Canadian defensive stock at a more reasonable valuation. The company continues to generate consistent earnings growth, rising dividends, and shareholder value through buybacks. While the yield may appear modest today, Metro’s strong business model and reliable growth profile make it an appealing choice for conservative, long-term portfolios — especially during market pullbacks.
