Is MTY Food Group (TSX:MTY) a stock to buy and hold?

Highlights

  • As we are heading towards more COVID-19 recovery, the S&P/TSX Capped Consumer Discretionary Index jumped by about two per cent on a quarter-to-date basis.
  • MTY Food Group Inc marked an improvement of 11 per cent year-on-year in its revenue to C$ 150.8 million.
  • MTY held a price-to-earnings ratio at 20.10 on October 13.

The Canadian consumer stocks are expected to perform well in the last quarter of this year as economic activity will likely pick up amid increased vaccinations. Bouncing back from the third wave of the COVID-19 pandemic, the S&P/TSX Capped Consumer Discretionary Index surged by about two per cent quarter-to-date (QTD).

Notably, this index tracks MTY Food Group Inc (TSX:MTY), a franchisor in the quick service and casual dining industry.

Is MTY Food Group TSX MTY a stock to buy and hold

The Quebec-based food company MTY Food Group Inc (TSX:MTY) posted a 11 per cent increase in its revenue to C$ 150.8 million in the third quarter of 2021, up from C$ 135.4 million in Q3 2020. This improvement in revenue was the outcome of Canadian sales growth in offices and malls. 

A look at the latest financial performance of MTY Food Group (TSX:MTY)

MTY reported system sales of over C$ 1 billion, marking a year-over-year (YoY) rise of 13 per cent, in its latest quarter. The casual dining concept resulted in a 45 per cent YoY increase to C$ 47.8 million, however, it was partly offset by C$ 43.4 million due to unfavorable fluctuation with regards to CAD/USD exchange rates.

Digital sales in North America amounted to C$ 185.5 million in this quarter, up from that of C$ 184.2 million in Q2 2020.

MTY Food Group Inc (TSX:MTY) Q3 FY 2021 results

The company noted an increased adjusted EBITDA of C$ 49.7 million in the third quarter of 2021, up from that of C$ 43.4 million in the same quarter a year ago.

Also read: Top 3 Canadian dividend penny stocks to buy before 40

Despite the delta variant, MTY recorded a YoY increase of 21 per cent to C$ 46.6 million in cash flow from operating activities, in its latest quarter. The company also noted a 23 per cent YoY growth in its free cash flow per diluted share to C$ 1.84 per share in Q3 2021. The increase in free cash flows was partially due to a higher adjusted EBITDA.

The company reported C$ 24.3 million of net income attributable to shareholders in this quarter, up from that of C$ 22.9 million in Q2 2020.

In Q3 2021, MTY repaid C$ 35.2 million of its long-term debt.

Bottom line

In the past year, this stock surged by almost 52 per cent and it expanded by nearly 22 per cent in the last six months.

Also read: Richelieu (TSX:RCH) stock soars as sales grow 20% YoY in Q3. Buy alert?

On Tuesday, October 12, MTY wrapped trading at C$ 65.64 apiece, up by 0.629 per cent.

At the time of writing, MTY stood with a price-to-earnings (P/E) ratio of 20.10, a price-to-book (P/B) ratio of 2.616, a price-to-cash flow (P/CF) ratio of 10.70 and a return on equity (ROE) of 13.63 per cent.

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