Metcash (ASX:MTS) is "undervalued" on a sum-of-the-parts basis but the multiple should re-rate on food earnings growth and improvement in the housing market, Jarden Research said in a Dec.3, note.

The wholesale distribution and marketing company reported earnings of AU$0.129 per share for the first half of fiscal 2025, down from AU$0.145 per share in the year-earlier period. Analysts polled by Visible Alpha expected EPS of AU$0.119.

Jarden notes that the Metcash Food segment is trading at a significant 75% discount to the S&P/ASX200 Index at 4.6 times.

"The implied discount is too large in our view. We continue to see Metcash as fundamentally undervalued, with the share price implying <5x earnings before interest and taxes (EBIT) for food," the investment firm said.

Jarden does not expect Metcash to trade at the same EBIT multiple as major retailers like Coles (ASX:COL) or Woolworths (ASX:WOW).

However, Jarden believes that earnings growth in the Food segment over fiscal 2025 and 2026, coupled with growing confidence in a housing market rebound into 2025, could trigger a re-rating of the company, provided the broader market conditions remain stable.

The investment firm maintains the company's overweight rating but lowered its price target to AU$4.10 from AU$4.30.

Metcash's shares fell past 1% at market close.