B&M European Value Retail (LSE:BME) is currently on my list of stocks to consider buying. With shares losing 29 percent of their value since the beginning of the year, dividend yield reached 3.7 percent.

I also think the stock market is underestimating the company’s growth prospects. There are clear opportunities as well as challenges.

Why did the stock drop?

B&M is by no means an obvious choice. Compared to others FTSE100 There is quite significant short interest in the stock, and the share price recently hit a new 52-week low.

The main reason for this is competition. The company aims to differentiate itself with low prices, but Tesco And Sainsbury’s They are in intense competition in this field.

Larger supermarkets also offer a wider range of products. This means that unless B&M can deliver a meaningful drop in price, it will encourage customers to go elsewhere.

As cost-of-living pressures begin to ease, finding deals has become less important for shoppers. This is also revealed in B&M’s results.

The company reported a 3.5% decline in comparable sales in its most recent update. This means its stores are generating less revenue than in 2023.

The risk of this continuing is why analysts UBS There is a ‘sell’ rating on the stock. However, I think there is another important criterion that investors should pay attention to.

Store expansions

Individual B&M stores may be less profitable than a year ago. But there’s much more to it than that, and that’s more than offset weak comparable sales.

Adjusted for exchange rate fluctuations, the company’s total sales increased by 2.4%. This was a result of new stores opening during the year, with a further 26 stores expected to open in the next nine months.

Ultimately, B&M hopes to reach 1,200 outlets, significantly more than its current store base of 741. If he can pull that off or something like that happens, I think the stock is a bargain right now.

Over time, I expect store count growth to more than offset lower comparable sales growth. And a stock with a price-to-earnings (P/E) ratio below 11 doesn’t need to grow much.

From a passive income perspective, the falling share price has caused the dividend yield to increase. Investors’ initial returns reached the highest level in the last 10 years at 3.7%.

B&M Value Retail dividend yield 2015-24

Created in TradingView

I think B&M is unlikely to cut its dividend as it retains more than 50% of its earnings. This means there could be growth and revenue ahead; A powerful combination for investors.

Is it time to buy?

I’m not sure there’s a better time to buy B&M shares than now. Competition in the retail space will always be intense, but I think current share prices very much reflect this.

The company will announce earnings later this month. I’ll see who is interested in the stock before deciding to add it to my portfolio.