Why I'd buy this ASX 200 stock (even if we're heading for a market crash)

I am a big fan of this business, which is why I recently invested.

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S&P/ASX 200 Index (ASX: XJO) stock Metcash Ltd (ASX: MTS) is an ASX defensive share I'd look to invest in right now. I think it's a great long-term buy, whether there's a bear market this year or not.

Metcash has been one of my preferred stocks to write about recently because of the compelling potential of its underlying divisions, appealing valuation, and large dividend yield. For me, it ticks all the boxes.

The company has three main divisions, including a food segment that supplies IGAs around the country.

Second is the liquor segment, which supplies a range of independent liquor retailers, including Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop and Duncans. It also supplies bars, pubs, restaurants and hotels.

Finally, the third pillar is the hardware division which includes Mitre 10, Total Tools, Home Timber & Hardware.

So why do I think the ASX 200 stock is a good buy, no matter what happens next? Here are two key reasons, and I'll also share some thoughts on the financial metrics.

Defensive earnings

With interest rates and inflation remaining high, I'm not sure when conditions will change enough for central banks to feel confident about cutting rates. US inflation in March was stronger than some investors expected.

I think the Metcash food and liquor divisions have really defensive earnings – we all need to keep eating. And people have indulged in alcoholic drinks for centuries, so I don't think that's going to change any time soon.

Remember, investors generally value a business based on its potential profit in the foreseeable future. I think the ASX 200 stock's food and liquor earnings aren't at risk of heavy declines, so a market crash or correction wouldn't faze me. I'd hope the Metcash profit and share price may fall less than the ASX 200 as a whole.

Supportive longer-term tailwinds

When we consider the drivers of Metcash's earnings, population growth is one of the most important. More people in the country means more people needing food, more potential liquor drinkers and more people needing a home (and potentially wanting various bits of hardware for renovations or other work).

Before the numerous RBA interest rate hikes, Metcash's hardware division was seeing solid profit growth. Buying Total Tools was a smart move, and with that business performing well, it could have a very promising future.

When interest rates finally start coming down, I think the ASX 200 stock's hardware division could see significant improvement.

Pleasing metrics

As I've said, I think Metcash's earnings are resilient and can grow. But the market doesn't appear to value it as highly as I think it's worth.

Looking at the projections for the ASX 200 stock on Commsec for FY25, the Metcash share price appears underrated – it's valued at 13x FY25's estimated earnings with a possible grossed-up dividend yield of 7.5%.

I think it's a buy today, particularly in the current uncertainty surrounding inflation and interest rates.

Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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