Metropolis Healthcare Ltd. - Expensive Stock

Good performance metrics, but price does not justify the growth outlook.

Company Overview

Metropolis Healthcare, also known as Metropolis Labs, is an Indian multinational chain of diagnostic labs, with its central laboratory in Mumbai, Maharashtra. Metropolis Healthcare has a chain of 124 clinical laboratories and 2400 collection centers across 7 countries including India

Share Details

• NSE:METROPOLIS

• Closing Price = 1,313.20 (14-Jun-23)

• 52 Week High = 1,791.20. Trading at 27% below 52 wk high

• 52 Week Low = 1,171.35. Trading at 12% above 52 wk low.

• P/E = 47

• Market Cap = 6,725 cr ( ~$ 820 million)

Quality: Returns on capital employed in cash

The return metrics look quite good, barring the results in FY22-23. Metropolis is an efficiently run company and the management has been able to execute quite well.

Growth

While the quality of the company is not in question, the problem is that the company is delivering a revenue growth of 12% with an PAT growth of 5% along with a negative free cash flow. The growth delivered in the past does not justify a PE of 47 and makes it an expensive stock.

So What????

If I own the stock, I may keep it based on my historic returns, future return expectations, and availability of alternative stock ideas

If I don’t own the stock, now may not be the best time to enter. I don’t want to buy a stock which is at PE of 47 and the outlook is a 15% kind of top-line growth. Better to see wait and see the what the management can do to get growth in the company to justify a PE of 47.

Disclaimer

• It is an analysis of the company data and not a stock recommendation

• My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company

• I look to own good companies at prices where there is a path to market beating returns over decades