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This is one of the best stocks to buy now on the FTSE 100!

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I believe FTSE 100 incumbent B&M European Value Retail (LSE:BME) is one of the best stocks to buy now. Should I add shares to my portfolio at current levels?

Retail giant

Best known as B&M, the discount retailer has become a household name in recent years. It serves over four million customers each week through its 685+ locations supported by 35,000 staff.

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I must admit there aren’t many retail stocks on my best stocks to buy now list. Retail stocks have not had the best time in recent years due to changing habits of consumers and competition in the marketplace. But B&M has bucked the trend to go from strength to strength. Discount retailers have risen in popularity as people look to make their hard-earned cash go further. I believe the pandemic exacerbated this. 

As I write, B&M shares are trading at 641p, whereas a year ago, the shares were trading for 479p, which is a 33% return over 12 months. The shares have easily beaten pre-pandemic levels and are trading at all-time highs.

Why I like B&M

B&M has performed consistently in the past and more recently. I understand past performance isn’t a guarantee of future performance, however I use it as a gauge. I can see that revenue and gross profit has increased year-on-year for four years. Coming up to date, interim results released in November for the 26 weeks to 25 September were promising. Group revenue increased 1.2% compared to the same period last year. And group profit before tax increased by 2.4%. An interim dividend of 5p per share was declared. This was up 16.3% from last year’s interim dividend. Net debt also decreased. 

The stocks I see at the best picks to buy now are attractively priced and would provide me with a passive income. B&M ticks both these boxes. At current levels, it has a price-to-earnings ratio of just 14. And the dividend yield stands at just over 2%, which lags the FTSE 100 average of 3%. But if I bought now and the share price growth continued, that would improve.

And I hope it would continue to grow with B&M currently growing at a fast rate. This is primarily through opening new stores throughout the UK and through its other brand Heron Foods, as well as its French subsidiary. This was highlighted by 14 new B&M stores opening in the UK alone in the interim period mentioned. B&M has set itself a target of having 950 store locations in the UK ,although no specific time frame has been put on this target.

Strong stocks have risks too

B&M is facing current macroeconomic issues including rising inflation and rising costs. These costs could be passed on to customers, but this could affect customer numbers and performance. If the costs aren’t passed on to customers, profit margins will be squeezed. Both of these aspects could affect investor returns and sentiment. In addition to this, supply chain issues and a shortage of HGV drivers in the UK could affect store operations and, in turn, performance overall.

Right now I think B&M is one of the best FTSE 100 stocks on the index. It has a good track record of performance, pays a dividend to make me a passive income and continues to grow. When looking for the best stocks to buy now for my portfolio, I look for all these traits. I would happily add B&M shares to my holdings right now.

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Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended B&M European Value. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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