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Our monthly Ice Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of income-focused Ice recommendations, to help Fools build out their portfolios.
“Best Buys Now” Pick #1:
B&M European Value Retail (LSE: BME)
- A recent profit warning and departure of the company’s CEO have compounded the sell off in the company’s shares and led its one year share price decline to 48%.
- While weak consumer demand doesn’t bode well for general merchandise spending and the reduction in profits is unwelcome, we view this sell-off as more of an opportunity than reason to panic.
- Full year 2025 adjusted EBITDA guidance is now £605m-£625m, down from the prior range of £620m-£660m. That’s unfortunate but doesn’t represent a material change and at worst suggests a minor year-on-year reduction from the £616m posted in FY24 (adjusted to exclude the extra week that landed in FY24).
- Were B&M more leveraged the combination of weak same store sales and leadership turmoil would give us pause. But net debt at the end of H1 was just £788m, so leverage remains within reasonable limits and suggests there is more than enough cash to make whatever investments the new CEO deems necessary as well as continuing to return significant sums to shareholders.
- B&M’s trailing dividend yield now sits at 5.3% and the company’s plan to move its legal HQ from Luxembourg is advancing. Once that’s complete it will be able to begin share buybacks – which we believe at the company’s current valuation of 8x consensus forward earnings would be a great use of cash.
