Loblaw (TSX:L) has long been considered a stable choice for investors seeking exposure to the consumer staples sector. But with periods of stagnation in the past, you may wonder: Is Loblaw stock a buy now? To answer that, let's dive into its performance history, growth prospects, and valuation to help you make an informed decision.

A history of period gains and setbacks

Loblaw's stock performance has been anything but smooth, with notable periods of stagnation. From 2015 to 2018, the stock saw a modest increase of just $10 per share. During this period, its annualized return was about 6.2%, which, while higher than the long-term inflation rate of 2-3%, was far from being an outperformer.

From early 2019 to the end of 2020, the stock barely moved, rising by only $2 per share, resulting in a compound annual growth rate (CAGR) of around 3.7%. This return barely beat inflation and showed limited momentum.

However, Loblaw stock experienced a major surge from early 2021 to 2022, climbing by an impressive 91%. This rise was likely driven by high inflation and the resulting consumer demand for essential goods. From mid-April 2022 through mid-December 2023, the stock once again traded sideways, with only a modest 3% annualized return.

In the past year, consumer staples stock had another leg-up, posting a 52% rise in stock value. So, while the stock tends to experience periods of stagnation, these are often followed by significant growth spurts, making it a potential buy for long-term investors when it stagnates.

Strong long-term performance

Looking at Loblaw's performance over the last decade, long-term investors have seen total returns of approximately 335%. This translates into annualized returns of 15.8%, a solid rate of return by most standards, and significantly outperforming the broader market that returned 8.9% annually in the period.

A key driver of this success has been the company's persistent earnings growth. Over the past 10 years, Loblaw has increased its adjusted earnings per share (EPS) by 11.5% per year. Additionally, the stock's price-to-earnings (P/E) ratio also expanded, contributing to its overall gains. In the beginning, Loblaw traded at a P/E ratio of about 15.6; today, it stands at roughly 22.

A defensive, growing business

As Canada's largest grocery retailer, Loblaw remains a cornerstone of the country's consumer landscape. Its portfolio of brands, including Superstore, T&T, No Frills, Independent, and Shoppers Drug Mart, attracts over 15 million Canadian families each week. The company continues to grow by expanding its store count, with plans to open 50 new stores this year and even more next year.

Given its defensive business model — serving essential needs like food and pharmacy — Loblaw stock is a reliable long-term investment. The stability of its operations, combined with steady expansion, positions it well for continued success.

The Foolish investor takeaway: Is it a buy now?

At its current price of around $190 per share, Loblaw stock is fully valued. For those looking to buy, it's alright to start building a position. However, if the stock experiences a period of sideways movement again or even dips, that could be an ideal opportunity to add more shares.

In conclusion, Loblaw stock is a solid long-term investment with a history of persistent growth and resilience. While it's not undervalued right now, its defensive business and expansion plans make it a worthy consideration for patient, long-term investors.