Why Metcash’s Share Price Fell Today

What Happened to Metcash’s Share Price?

The share price of food and liquor wholesaler Metcash [ASX:MTS] was the largest decliner amongst the top 100 companies today. Just before the market closed, the stock price was down over 4%. The selloff continues a horrible 12 months for the stock, with the share price now down over 55% in a year.

Why Did This Happen to MTS Shares?

Today’s selloff came on no news from the company. It’s likely that the prior day’s weak trading update from Woolworths is the reason behind the price fall. The market increasingly sees Metcash as a company lacking strategic focus. It supplies groceries and fresh produce to the IGA stable of grocery retailers, who are doing it tough against the dominant brands of Coles and Woolworths. Also, new Entrant Aldi is gaining market share.

What Now for Metcash?

Metcash’s share price has been in a nasty downtrend, more or less, since it peaked at around $5.50 per share in mid-2007. Over the past year, the downtrend has picked up pace, with the share price now approaching $1.20. Today’s move lower marks a new long term low for the stock, which is a bearish sign. It suggests earnings pressure will persist for the company and an earnings downgrade is likely.

The best shareholders can probably hope for is a takeover or perhaps a breakup of the assets, but that might be a little optimistic until you see further, deep share price falls.

Unless you want to punt on some corporate activity, this one looks like a value trap.


Greg Canavan+
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Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

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