On Tuesday, Scotiabank initiated coverage on BBB Foods Inc (NYSE:TBBB), a hard-discount grocery retailer operating in Mexico, with a strong endorsement. The bank's analyst assigned a "Sector Outperform" rating to the company's Class A common shares and set a price target of $33.00.
This target suggests a potential return of approximately 57% from the current valuation and is based on a 2025E EV/EBITDA target valuation of 15.5 times, compared to the near-term EV/EBITDA of 10.3 times.
BBB Foods, known for its Tiendas 3B store format, has shown significant growth with approximately 2,300 stores recorded at the end of 2023. Scotiabank's coverage note highlighted the company's impressive expansion rate, with a compound annual growth rate (CAGR) of around 17% projected over the next three years. The analyst's expectations are supported by the retailer's history of double-digit same-store sales (SSS) growth.
The analyst's positive outlook extends to BBB Foods' financial performance, anticipating continued material growth in both EBITDA and earnings per share (EPS). The company's business model and market positioning, encapsulated in its name "Bueno, Bonito y Barato" (Good, Nice, and Affordable), were also factors that contributed to the favorable rating.
Scotiabank's coverage note reflects confidence in BBB Foods' strategic operations and its ability to sustain its growth trajectory. The bank's assessment points to a robust expansion plan that is expected to deliver significant shareholder value in the foreseeable future.
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