I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought this stock for my Canadian Trading account in 2009. I bought it because I have done well with it in my Pension Account and it was a consumer stock.
Over the past year in insider trading there was some $18.4M of insider selling and $10.7M of insider buying with a net of insider selling at $7.7M. Insiders not only have options, but also option like vehicles of Deferred Share units, Performance Share Units, Share-Based Award and Restricted Share Units. In 2013 outstanding shares were increased for stock options by 5,000 shares with a book value of $400,000.
There are voting shares or common shares and non-voting Class A shares. There is lots of insider ownership. For example, the CFO owns common shares worth around $52M and Class A shares worth around $81M and a director, Martha Gardiner Billes, owns common shares worth around $262M and Class A shares worth around $80M.
The 5 year low, median and high median Price/Earnings per Share Ratios are 9.43, 11.12 and 12.26. The 10 year low, median and high median P/E Ratios are 10.00, 12.07 and 15.11. The P/E's have been moving lower in the last few years and then have started to be higher in 2013. The low P/E for 2013 is 11.02, the median was 13.76 and the high was 16.49.
The current P/E is 13.56 based on a stock price of $99.81 and 2014 earnings estimates of $7.36. Based on the median P/E's over last 5 years, this P/E is relatively high as the 5 year high median P/E is 12.26. Based on median P/E's over the last 10 years, this P/E of 13.56 is still within a reasonable range, if a little on the high side as it is higher than the 10 year median P/E of 12.07.
I get a Graham Price of $106.22. The 10 year low, median and high median Price/Graham Price Ratio is 0.68, 0.83 and 1.04. The current P/GP Ratio is 0.94 based on a stock price of $99.81. This stock price tests says that the stock price is reasonable, but on the high side.
The 10 year Price/Book Value per Share Ratio is 1.28 and the current P/B Ratio is 1.46 based on a stock price of $99.81 and a Book Value per Share of $68.14. The current P/B Ratio is some 15% higher than the 10 year P/B Ratio and this stock price test says that the stock price is reasonable, but still a bit on the high side.
The 5 year median dividend yield is 1.75%. The current dividend yield is 1.75%. This stock price test says that the stock price is reasonable. If you look at historical dividend yield, the average is 1.78%, a value very close to the current yield. If you look at the median of the historical H/L dividend yield, you get a dividend yield of 1.60 and the current dividend yield is almost 10% higher. The historical dividend yield testing suggests that the stock price is reasonable.
There is a CBC news article on how Canadian Tire has benefited from this winter's cold weather. In February 2014, Chris Sorensen of MacLean magazine did an interview with Stephen Wetmore, the CEO of Canadian Tire. There is an BNN video that starts off talking about the good news of Canadian Tire's 4th quarter and how they still have time to prepare for coming US competition. (With BNN you have to watch a commercial first.)
When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The 12 month stock target price is $113.00. This implies total returns of 14.97% with 1.75% from dividends and 13.22% from capital gains.
The stock price seems to be reasonable, although some tests show it is rather on the high side of the reasonable range. See my spreadsheet at ctc.htm.
This is the second of two parts. The first part was posted on Wednesday, March 5, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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ReplyDeleteI am personally not convinced CTC is good for a long term investment. When I look around the stores these days all I see is cheap junk cluttering the store and loosing focus on home products (seriously would you buy milk or food from Canadian Tire?). Sure the Wal-Mart's are important competitive adversaries but does it mean you have to be in the same lower end product spectrum as them? Secondly, they are diversifying into the financial business which, to me, is far out of the realm of merchandising. The acquisitions of Mark's & FGL where exactly what they needed to do. Are they loosing focus on their core business with this finance spin-out?
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