Monro Muffler Has 'Promising' Unit Growth Potential, Goldman Sachs Says In Upgrade

Goldman Sachs  sees substantial growth potential in Monro Inc MNRO and a chance to recapture same-store sales momentum.

The Analyst

Matthew Fassler of Goldman Sachs upgraded Monro from Neutral to Buy and raised the stock’s 12-month price target from $59 to $71.

The Thesis

Driven by a new senior management team and favorable automotive demographics, Monro has a “promising” unit growth story and a chance to regain its same-store sales momentum over the next three years, Fassler said in a Friday note. (See the analyst's track record here.) 

75 percent of Monro’s stores are in just 10 states, giving the firm a substantial growth opportunity, the analyst said. 

Competition is fragmented, with independent competitors facing headwind, he said. As the most prominent public company in its space, Monro has visibility and access to capital, Fassler said. 

Even with its fundamentals poised to improve, Monro's valuation is still well within its historical band, according to Goldman Sachs. 

“If the company re-establishes a more consistent same-store growth algorithm — as we now model — we would expect its recent re-rating to hold, and for the stock to appreciate at a slightly faster rate than anticipated EPS growth," Fassler said. 

Price Action

Monro shares were trading up 6.88 percent to $65.68 at the time of publication Friday.

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Photo by Ildar Sagdejev/Wikimedia.