Monro, Inc. (MNRO): A Bull Case Theory

By Ricardo Pillai | May 30, 2025, 1:13 AM

We came across a bullish thesis on Monro, Inc. (MNRO) on Enterprising Investor’s Substack. In this article, we will summarize the bulls’ thesis on MNRO. Monro, Inc. (MNRO)'s share was trading at $12.66 as of 23rd May. MNRO’s trailing and forward P/E were 19.78 and 15.82 respectively according to Yahoo Finance.

tire factory, tire manufacturer
Copyright: baranq / 123RF Stock Photo

Monro (MNRO), previously highlighted when trading at $30 with an estimated fair value of $27, has since declined to $12.80, prompting a fresh look at the stock. In 2024, the company continued to struggle with inflation and a cautious consumer environment, as customers delayed purchases and opted for cheaper tires. This ongoing weakness has led to further deterioration in both the share price and free cash flow.

A year ago, Monro traded at a 6x FCF multiple, and while it now trades at 5.67x, the compression is due to a declining FCF base rather than a material improvement in valuation. Meanwhile, its price-to-book ratio has fallen from 1.25x to just 0.59x, indicating significant market pessimism. Despite the weak backdrop, Monro currently yields 8.75%, raising questions about the dividend’s sustainability. On a net income basis, the 175% payout ratio suggests it’s not well-covered, but cash flow paints a more forgiving picture.

In the most recent period, Monro generated $98 million in operating cash flow, spent $27 million on capex, and paid $36 million in dividends, leaving a modest $35 million cushion. While this suggests the dividend may be sustainable in the near term, any further business deterioration could force a cut. With low debt, a high yield, and a valuation that looks cheap both on free cash flow and book value, Monro appears more compelling now than it did at higher prices last year. Though headwinds remain, the stock merits deeper due diligence at these depressed levels.

Monro, Inc. (MNRO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held MNRO at the end of the fourth quarter which was 17 in the previous quarter. While we acknowledge the risk and potential of MNRO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MNRO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.

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