Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer’s has been falling. Despite this, she’s still bullish on the stock.

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In 2024 to date, the FTSE 100 index is up 13%, including dividends. In the same time period, B&M (LSE: BME) shares have dropped a similar amount.

However, I still think it’s a good stock for me to buy for my holdings. Here’s why I’d be willing to snap up some shares as soon as I can.

Why have B&M shares fallen?

It’s worth noting that the discount retailer’s growth story is a remarkable one, in my view. It has grown organically, with rising earnings, and provided shareholder value for many years now.

However, in the most recent update, I reckon flat operating cash flow, as well as adjusted earnings levels are what probably held the shares back. Plus, continued economic volatility, including a recently announced general election, won’t have helped.

Over a 12-month period, the shares are down 10% from 519p at this time last year, to current levels of 465p.

My investment case

I do understand past performance is not a guarantee of the future, but it’s hard for me to ignore B&M’s impressive track record and savvy modus operandi. A prime example of this is the advantage it gained by the recent bankruptcy of rival Wilko. B&M even snapped up some of Wilco’s former locations to capitalise, and boost its own presence and market share.

Coming up to date, the full-year report released 5 June for the year ended 30 March 2024 made for good reading.

Some of the main takeaways for me were double-digit growth in revenue across the group, as well as increased profitability too. Furthermore, another impressive dividend for shareholders pushed the forward dividend yield close to 5%. This is higher than the index average of closer to 4%. However, I do understand that dividends are never guaranteed.

Next, as the shares have fallen, B&M’s valuation looks extremely attractive to me. The shares trade on a price-to-earnings ratio of 12. This is slightly higher than the FTSE 100 average of 11. However, I reckon it’s a bargain for a top company delivering constituent earnings growth, continued growth potential, and offering good shareholder value.

Risks and final thoughts

B&M’s offering of day-to-day discounted products has been popular among consumers during the recent economic troubles. A cost-of-living crisis has led to many people trying to get more bang for their buck, and this has helped B&M’s performance.

One issue I must note is heightened competition in this arena. The bigger traditional supermarkets are vying for dominance, and slashing prices and offering essential ranges. On top of that, supermarket disruptors Aldi and Lidl, are also rapidly gaining market share too. I’ll keep an eye on this as there is a chance B&M’s earnings and returns could be affected by competitors gaining any sort of edge.

Overall, I was a bit surprised to see B&M shares drop. However, it’s just offered me an even better entry point to be able to buy some quality shares when I next have some investable cash.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Sumayya Mansoor has no position in any of the 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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