Thursday, April 4, 2013

Canadian Tire Corp 2

On my other blog I am today writing about Proxies ...continue...

I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC- CDNAF). I first bought this stock in 2000 and then more in 2009 and 2010. I have made a total return of 10.09% per year on this stock, with 8.4% from capital gain and 1.69% from dividends. I made most of this return on the stock I bought in 2000.

When I look at insider trading I find some $26.1M of insider selling and $8.8M of Insider Buying. The net selling is at $17.3M. All insiders' selling is by the CFO and he seems to be selling off some of his non-voting Class A shares. Problem is you never really know why people sell shares. They could just need the money.

The CEO has Class A shares worth $1.9Mand has options are worth $55.9M. The CFO has Class A shares worth $61M and Common (voting) share worth $36.3M and has options worth $7.8M. CTC Dealers own $58M of Class A shares and $60.5M of Common shares. They have some 20% of the Common Shares. Martha Gardiner Billes has almost 62% of the Common shares. There is a lot of insider ownership.

Sun Life also owns substantial amount of Class A shares worth around $169M. Generally the Common (voting) shares sell at a premium to the Class A Shares. That premium is current running around $15.

I get 5 year low, median and high median Price/Earnings Ratios of 9.41, 11.12 and 12.26. The current P/E Ratio is 10.68. I get a Graham Price of $94.00. The 10 year low, median and high median Price/Graham Price Ratios are 0.68, 0.81 and 1.02. The current P/GP Ratio is 0.76. Both these tests suggest a reasonable stock price.

The 10 year median Price/Book Value per Share Ratio 1.35. The current P/B Ratio is 1.22. The current P/B Ratio is some 90% of the 10 year median ratio and this suggests a reasonable stock price.

The 5 year median Dividend Yield is 1.75%. The current dividend yield is 1.96% a value around 12% higher. It generally signals a good stock price when the current Dividend Yield is higher than the 5 year median Dividend Yield. However it is only 12% higher so the price looks more reasonable than cheap.

When I look at the analysts' recommendations I find Strong Buy, Buy and Hold. The consensus recommendation is a Buy. (This is the most common configuration for analysts' recommendations.) The 12 month consensus stock price is $78.60. This implies a total return of 11.94% with 1.96% from dividends and 9.98% from capital gains.

Of course the elephant in the room is that recent fall in the TSX. It is also interesting that the S&P500 is doing better than the TSX as it did not fall as much as the TSX yesterday and it was up a bit today. Are stocks going to get a lot cheaper soon? I do not know. We certainly are nowhere near solving the debt crisis. However, it is not May yet, so prices may hold up for a bit longer.

This is considered a growth stock. It has a low dividend yield, with a 5 year median dividend yield of 1.75%. The dividend increases are good with 10 year growth in dividend at 11.6%. Dividend Payout Ratios are good at 19% for earnings and 9% for cash flow. This would appear to be a good growth stock at a reasonable price. See my spreadsheet at ctc.htm.

Canadian Tire Corp engages 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. The company is controlled by the Billes family who own most of the voting shares. Its web site is here Canadian Tire.

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 for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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