Mr Price: profit grows, but cash goes to dividends and debt

On August 25, Mr Price reported results for fiscal year 2026: revenue grew 4.1%, EBITDA – 5.2%, net profit – 2.3%. The company remains with net cash and pays generous dividends. The shares look attractive: the portal's model implies +7% upside, and the dividend yield exceeds 5.6%.

Key takeaways

— Revenue grew 4.1% to 42.4 billion ZAR, but growth slowed compared to the prior year

— EBITDA margin expanded by 0.2 pp to 22.6%, supporting operating profit

— Net profit rose 2.3%, but net margin declined 0.2 pp to 8.8%

— The company generates strong operating cash flow – 8.0 billion ZAR over the trailing twelve months

— Net debt is negative: minus 4.7 billion ZAR, or minus 0.5 times EBITDA

— Dividend yield of 5.7% is above the three-year average, making shares attractive for income

— The portal's model implies +7% upside to fair value

Attractiveness

Key figures, ZAR bn

Revenue grew 4.1% to 42.4 billion ZAR, but growth slowed compared to the prior year

For fiscal year 2026, Mr Price's revenue reached 42.4 billion ZAR, up 4.1% year-on-year. This is a noticeable slowdown: in the prior year, growth was higher, though exact figures are not disclosed. The slowdown may reflect pressure on consumer demand in South Africa, where the company operates predominantly.

Nevertheless, the company maintained positive momentum, indicating the resilience of its retail model. In an environment of high inflation and weak consumer confidence, even 4.1% growth is a decent result.

EBITDA margin expanded by 0.2 pp to 22.6%, supporting operating profit

EBITDA for the reporting period grew 5.2% – faster than revenue, thanks to which the EBITDA margin expanded from 22.4% to 22.6%. This suggests that the company managed to contain operating expense growth despite inflationary pressures.

Margin expansion is a positive signal, as it means each additional rand of revenue brings more operating profit. However, the improvement is modest and should not be overemphasized.

Net profit rose 2.3%, but net margin declined 0.2 pp to 8.8%

Net profit for fiscal year 2026 increased by 2.3%, slower than EBITDA. As a result, net margin declined from 9.0% to 8.8%. The reason is likely higher interest expenses or tax burden, though exact factors are not disclosed.

The decline in net margin is not critical, but it shows that some operational efficiency is eaten by financial or tax items. For shareholders, this means earnings per share growth will be lower than EBITDA growth.

The company generates strong operating cash flow – 8.0 billion ZAR over the trailing twelve months

Over the trailing twelve months, operating cash flow amounted to 8.0 billion ZAR. This is a solid figure that covers both capital expenditures and dividend payments. Strong cash flow is the foundation for maintaining the dividend policy.

Importantly, cash flow is generated from operations, not one-off items. This enhances business sustainability and reduces the risk of dividend cuts in the future.

Net debt is negative: minus 4.7 billion ZAR, or minus 0.5 times EBITDA

As of the latest balance sheet date, net debt stood at minus 4.7 billion ZAR, meaning the company has a net cash position. The ratio of net debt to EBITDA for the trailing twelve months is minus 0.5. This indicates that the company has more cash than debt, providing financial flexibility.

Over the trailing twelve months, net debt decreased by 0.5 billion ZAR, indicating that the company continues to accumulate cash. This allows it to finance growth and pay dividends without increasing debt burden.

Dividend yield of 5.7% is above the three-year average, making shares attractive for income

Over the trailing twelve months, the dividend yield was 5.7%. This is above the three-year average yield, making the shares attractive for income-oriented investors. The company consistently pays dividends, and cash flow supports this.

Our estimated dividend for the current year, based on the payout ratio and net profit, suggests maintaining a yield of around 5.7%. The main risk to dividends is a decline in consumer demand, which could hit profit and cash flow.

The portal's model implies +7% upside to fair value

Our valuation model, based on EBITDA growth and a target multiple, shows that Mr Price shares have a potential upside of +7% to fair value. This is a moderate upside, which combined with the dividend yield gives an attractive total return.

The current trailing P/E multiple is 11.1, which is below the three-year average. EV/EBITDA is 3.9, which also looks low. Such valuation leaves room for growth, especially if the company maintains profit growth rates.

Valuation on the latest reported figures

Bottom line

The fiscal year 2026 report showed moderate revenue and EBITDA growth, but net profit grew slower due to a decline in net margin. The company generates strong operating cash flow and has a net cash position, supporting generous dividends. Shares trade at a discount to their own history and, according to the portal's model, have +7% upside. Verdict – attractive: a combination of moderate growth, dividend yield above 5.6%, and low valuation makes the shares interesting for long-term investors. The main question is whether the company can maintain margin and cash flow amid weak consumer demand.