Canadian Tire Corporation Ltd
TSX:CTC.A
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Canadian Tire Corporation Ltd
Intrinsic Value
The intrinsic value of one
CTC.A
stock under the Base Case scenario is
247.32
CAD.
Compared to the current market price of 150.54 CAD,
Canadian Tire Corporation Ltd
is
Undervalued by 39%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
Valuation Backtest
Canadian Tire Corporation Ltd
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Fundamental Analysis
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Canadian Tire Corporation Ltd. is a quintessential Canadian retail powerhouse, with a rich history that dates back to 1922. Over the decades, it has evolved into a diversified company, offering a broad range of products and services across its numerous store formats, including Canadian Tire retail stores, Mark’s, and SportChek. With a mission to support families' everyday needs, the company specializes in automotive, hardware, sports, and home goods, enabling it to capture a diverse customer base. Investors are drawn to Canadian Tire for its robust market presence, innovative retail strategies, and strong brand loyalty, which have contributed to steady revenue growth despite economic fluctua...
Canadian Tire Corporation Ltd. is a quintessential Canadian retail powerhouse, with a rich history that dates back to 1922. Over the decades, it has evolved into a diversified company, offering a broad range of products and services across its numerous store formats, including Canadian Tire retail stores, Mark’s, and SportChek. With a mission to support families' everyday needs, the company specializes in automotive, hardware, sports, and home goods, enabling it to capture a diverse customer base. Investors are drawn to Canadian Tire for its robust market presence, innovative retail strategies, and strong brand loyalty, which have contributed to steady revenue growth despite economic fluctuations.
In recent years, Canadian Tire has increasingly embraced e-commerce and digital transformation, positioning itself well in a rapidly changing retail landscape. The company’s commitment to customer experience, coupled with strategic initiatives like expanding its private-label offerings and enhancing supply chain efficiencies, provides a solid foundation for future growth. Canadian Tire's impressive financials, characterized by strong cash flow generation and consistent dividend payments, make it an attractive option for investors seeking both stability and potential for long-term returns. As Canada's go-to destination for a wide array of household and lifestyle products, Canadian Tire stands poised to thrive in an evolving marketplace, balancing tradition with innovation.
Canadian Tire Corporation Ltd. operates through several core business segments, each contributing to its overall revenue and growth strategy. Here are those key segments:
-
Retail: This is the most visible segment of Canadian Tire's business, encompassing a wide range of merchandise. It includes:
- Canadian Tire Retail (CTR): Features automotive, hardware, sports, leisure, and home products. CTR operates numerous stores across Canada.
- Mark's: Specializes in clothing and footwear with a focus on workwear and casual apparel.
- SportChek: A leading retailer in the sporting goods and athletic apparel sectors, offering a variety of sports-related products.
-
Financial Services: Canadian Tire offers financial products and services, primarily through Canadian Tire Financial Services. This segment includes:
- Credit Cards: Offers products like the Canadian Tire Options Mastercard, allowing customers to earn rewards.
- Insurance Products: Provides various insurance products, including home and auto insurance.
- Lending Services: Offers installation loans and other financing options for customers.
-
CT REIT (Canadian Tire Real Estate Investment Trust): This segment manages a portfolio of properties primarily used by Canadian Tire and its various retail segments. CT REIT generates rental income and provides a stable cash flow, helping support the corporation's broader business operations.
-
E-commerce and Digital Services: In recent years, Canadian Tire has significantly invested in its online presence and digital capabilities, enhancing its e-commerce platform to compete better in the retail sector. This includes online shopping, click-and-collect services, and mobile app functionalities.
-
Automotive Services: Canadian Tire offers a broad range of automotive products and services through its stores and service centers. This includes tire sales, auto parts, and a variety of maintenance and repair services.
Each of these segments contributes to the holistic strategy of Canadian Tire Corporation, allowing it to leverage its brand strength and customer loyalty to drive revenue growth across diverse channels and markets.
Canadian Tire Corporation Ltd (CTC) possesses several unique competitive advantages that contribute to its standing in the retail market. Here are some of the key advantages:
-
Diverse Product Range: CTC operates across multiple categories, including automotive, home products, sporting goods, and gardening supplies. This diversification allows it to attract a wide customer base and cater to various needs.
-
Strong Brand Loyalty: The Canadian Tire brand is a household name in Canada, with deep-rooted recognition and customer loyalty built over decades. This brand equity makes it difficult for competitors to capture market share.
-
Loyalty Programs: Canadian Tire offers robust loyalty programs, such as the Canadian Tire Money and Triangle Rewards program, which incentivize repeat business and enhance customer retention.
-
Extensive Retail Footprint: With a large number of retail locations across Canada, CTC benefits from a strong geographical presence, making it accessible to customers in both urban and rural areas.
-
Integrated Business Model: CTC operates through a variety of channels, including physical stores, online platforms, and their catalog. This multi-channel strategy enhances customer engagement and provides a seamless shopping experience.
-
Private Label Brands: CTC offers well-regarded private label products, which typically have higher margins than national brands. This enables them to compete on price while maintaining profitability.
-
Supply Chain and Distribution Network: CTC has established a strong supply chain and distribution system that allows for effective inventory management and timely delivery of products, reducing costs and improving customer satisfaction.
-
Commitment to Sustainability: Canadian Tire has shown a commitment to sustainable business practices, which resonates well with environmentally conscious consumers and enhances its brand image.
-
Community Engagement: CTC actively participates in community-focused initiatives and sponsorships, strengthening its ties with local communities and enhancing its brand reputation.
-
Innovation in Technology: The company invests in modern technology for retail operations, including e-commerce enhancements and data analytics, improving customer experience and streamlining operations.
These competitive advantages position Canadian Tire Corporation Ltd as a resilient player in the Canadian retail market, enabling it to differentiate itself from competitors and maintain its market leadership.
Canadian Tire Corporation Ltd (CTC) faces several risks and challenges in the near future, which can be categorized into various sectors:
1. Economic Factors
- Recession Risks: Economic downturns may impact consumer spending, especially for discretionary items.
- Inflation: Rising costs of goods and services can squeeze margins and affect pricing strategies.
2. Competitive Landscape
- Increased Competition: The retail market is highly competitive, with both brick-and-mortar and online retailers (like Amazon) expanding their offerings.
- Market Share Pressure: Intense competition could lead to price wars that affect profitability.
3. Supply Chain Disruptions
- Global Supply Chain Issues: Continuing supply chain disruptions stemming from global issues (such as geopolitical tensions, pandemics, or natural disasters) can impact inventory levels and product availability.
- Logistics Costs: Rising shipping and logistics costs can affect overall efficiency and profitability.
4. Consumer Trends
- Changing Consumer Preferences: Shifts towards online shopping and sustainable products require adaptation in strategy and inventory management.
- Technology Integration: The need for advanced technology implementations (e-commerce, inventory management, etc.) can be a challenge.
5. Regulatory Environment
- Compliance Costs: Changes in regulations (environmental policies, labor laws) can increase operational costs.
- Tariffs and Trade Policies: Trade restrictions or tariffs can impact import costs and supply chain strategies.
6. Technological Advancements
- Digital Transformation: Keeping up with e-commerce trends and integrating technology quickly enough to meet consumer expectations can be a challenge.
- Cybersecurity Risks: Increased reliance on digital platforms opens up vulnerabilities and risks of data breaches.
7. Real Estate and Operational Costs
- Lease and Property Management: High operational costs associated with maintaining physical retail locations, especially in prime areas.
- Economic Viability of Stores: With the rise of e-commerce, maintaining the profitability of physical stores may be a concern.
8. Brand and Reputation Risks
- Customer Loyalty: Maintaining brand loyalty in a competitive market where customers have many choices is crucial.
- Product Quality/Reputation Issues: Any issues regarding product recalls or safety could damage the brand's reputation.
9. Sustainability Initiatives
- Green Expectations: Increasing consumer expectations for sustainability practices could require significant investment and change in operational practices.
Summary
To navigate these challenges, Canadian Tire Corporation Ltd must remain agile, adapt to changing market conditions, embrace technology, and maintain its commitment to customer service and quality while safeguarding its operational efficiency and brand reputation.
Revenue & Expenses Breakdown
Canadian Tire Corporation Ltd
Balance Sheet Decomposition
Canadian Tire Corporation Ltd
| Current Assets | 11.1B |
| Cash & Short-Term Investments | 597.6m |
| Receivables | 7.4B |
| Other Current Assets | 3.1B |
| Non-Current Assets | 10.8B |
| Long-Term Investments | 500m |
| PP&E | 7.2B |
| Intangibles | 2.2B |
| Other Non-Current Assets | 829.8m |
| Current Liabilities | 6.2B |
| Accounts Payable | 2.6B |
| Short-Term Debt | 1.2B |
| Other Current Liabilities | 2.4B |
| Non-Current Liabilities | 10B |
| Long-Term Debt | 6.3B |
| Other Non-Current Liabilities | 3.7B |
Earnings Waterfall
Canadian Tire Corporation Ltd
|
Revenue
|
16.4B
CAD
|
|
Cost of Revenue
|
-10.7B
CAD
|
|
Gross Profit
|
5.6B
CAD
|
|
Operating Expenses
|
-4.3B
CAD
|
|
Operating Income
|
1.3B
CAD
|
|
Other Expenses
|
-938m
CAD
|
|
Net Income
|
381.7m
CAD
|
Free Cash Flow Analysis
Canadian Tire Corporation Ltd
| CAD | |
| Free Cash Flow | CAD |
The company reported a stable sales performance, slightly up 0.1% from the previous year, while normalized diluted EPS remained almost flat at CAD 3.08. However, reported income dropped to CAD 1.76, down by CAD 0.67. Costs stemming from a distribution center fire are expected to decrease, but have already impacted EPS by an additional CAD 0.15. Retail sales dipped under 3% to CAD 5.2 billion, due to a 19% fall in petroleum sales. Revenue grew by 7% over last year, although gross margin faced declines due to higher write-offs and net interest expenses, with the ECL allowance finishing at 12.7% and within target.
What is Earnings Call?
CTC.A Profitability Score
Profitability Due Diligence
Canadian Tire Corporation Ltd's profitability score is 50/100. The higher the profitability score, the more profitable the company is.
Score
Canadian Tire Corporation Ltd's profitability score is 50/100. The higher the profitability score, the more profitable the company is.
CTC.A Solvency Score
Solvency Due Diligence
Canadian Tire Corporation Ltd's solvency score is 35/100. The higher the solvency score, the more solvent the company is.
Score
Canadian Tire Corporation Ltd's solvency score is 35/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
CTC.A Price Targets Summary
Canadian Tire Corporation Ltd
According to Wall Street analysts, the average 1-year price target for
CTC.A
is 163.4 CAD
with a low forecast of 126.25 CAD and a high forecast of 201.6 CAD.
Click here to dive deeper.
Dividends
Current shareholder yield for CTC.A is
.
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Profile
Canadian Tire Corporation Ltd
Country
Industry
Market Cap
Dividend Yield
Description
Canadian Tire Corp. Ltd. operates as a general merchandise retailer for gasoline, automotive, sports and home products. The company is headquartered in Toronto, Ontario and currently employs 13,435 full-time employees. The firm operates through three segments: Retail, Financial Services, and CT REIT. The Retail segment includes business, which is conducted under a number of banners, including Canadian Tire, Canadian Tire Gas (Petroleum), Mark’s, PartSource, Helly Hansen, Party City1 and various SportChek banners. This segment also includes the Dealer Loan Program. The Financial Services segment provides financial and other ancillary products and services, including Triangle-branded consumer credit cards, in-store financing, insurance products, and retail and broker deposits. In addition, Financial Services segment provides payment processing services to the Company's retail banners. The CT REIT segment operates as a closed-end real estate investment trust. This segment owns, develops and leases income-producing real estate properties across Canada.
Contact
IPO
Employees
Officers
The intrinsic value of one
CTC.A
stock under the Base Case scenario is
247.32
CAD.
Compared to the current market price of 150.54 CAD,
Canadian Tire Corporation Ltd
is
Undervalued by 39%.
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