Tuesday, August 12, 2008

Canadian Tire Corp 2

As I said yesterday, I bought this stock first in February 2000. There are various calls on this stock, from buy to hold. A lot of analysts feel that the earnings this year will be less than for 2007 and some that it will be slightly higher. There are, of course, fears that Canadian Tire might have problems competing against Wal-Mart. There seems to lots of buying and selling of this stock by insiders, and the buys seem to be greater than the sells, but mostly, there was not much change in insider ownership.

Looking at a chart of Canadian Tire, they tumbled in 2000, before the TSX bear market of 2001. This stock has done as well as the market until December 2007 when it has done much worse. This stock is part of the TSX Consumer’s Discretionary Index. It is done better than this index over the last 5 years, but the pattern of the index and this stock is the same. Over the past year, Canadian Tire has followed the TSX Consumer’s Discretionary Index almost exact, until August. At the time, there was an up tick in the index, but not in this stock. However, in the last week, there has been an uptick in this stock as well.

In June 2008, Canadian Tire increased their dividend by 13.5%. This would seem like a vote of confidence by the company if they raise the dividend. This is higher than the 5 year average of 13%. Also, the 5 year average P/E is 15.5. With the lowest of the estimate EPS, the P/E for 2008 would be 13 and if the EPS is $5.20, the P/E would be 10. This is almost as low as the P/E was in 2000, when it was 9.8.

I also looked at the Accrual Ratio for the quarter ending in June and it is -2.8%, a much better figure that for December 2007 which was 22%. However, I would rather have the accrual negative because the Cash from Operational Activities was higher than the Net Income, rather than have money from Investing Activities making this figure negative. A negative is that the EPS for the first and second quarter is lower than the comparable ones for the year earlier. However, a positive note is that the Revenue for the first and second quarters is higher than the comparables of a year earlier. You first have to grow Revenue, to grow earnings.

I do not have that much of this stock (2% of my holdings), but I am holding on to it. I, unfortunately, do not have money at this time for buying stock, so I will not be increasing my holdings.

Canadian Tire Corporation is engaged in retail sales, financial services and petroleum sales. They own Canadian Tire Store, Gas Outlets, Parts Source Stores and Mark's Work Warehouse. The Canadian Tire stores offer a unique range of automotive, sports and leisure and home products.

Its web site is http://www2.canadiantire.ca/CTenglish/corpidx.html.
See my spreadsheets on this company at www.spbrunner.com/stocks/ctc.htm which I have reloaded with estimates for 2008.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

No comments:

Post a Comment