Is it a good company at a reasonable price? I do like this company and I have had it for a long time. I think that the current stock price is relatively cheap. I probably will not buy anymore because I do have a fair bit of my portfolio in this stock.
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 stock for my trading account in 2009 because I have done well with it in my Pension Account and it was a consumer stock.
When I was updating my spreadsheet, I noticed I have had this stock for slightly over 23 years and I have made a total return of 11.89% per year with 9.62% from capital gains and 2.27% from dividends. I probably did better than the chart showing the returns for 20 and 25 years because I made several purchases over a period of time.
If you look at growth over the past 5 and 10 years, the fastest growth is in dividends. It is much faster than the Revenue growth, but not that much faster than earnings growth. The dividends are growing faster than cash flow. I not only looked at Cash Flow, but also Cash Flow excluding Working Capital. Even though this cannot continue, currently Dividend Payout Ratios are relatively low.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 32.57% | 5.80% |
| 5 | AEPS Growth | 75.23% | 14.73% |
| 5 | Net Income Growth | 42.05% | 7.27% |
| 5 | Cash Flow Growth | -71.87% | -10.27% |
| 5 | CF Growth excl WC | 51.11% | 8.61% |
| 5 | Dividend Growth | 126.92% | 17.81% |
| 5 | Stock Price Growth | -15.83% | -2.90% |
| 10 | Revenue Growth | 55.86% | 4.54% |
| 10 | AEPS Growth | 190.25% | 12.62% |
| 10 | Net Income Growth | 109.15% | 7.66% |
| 10 | Cash Flow Growth | -31.27% | -2.68% |
| 10 | CF Growth excl WC | 76.44% | 5.84% |
| 10 | Dividend Growth | 391.67% | 17.26% |
| 10 | Stock Price Growth | 103.95% | 7.39% |
If you had invested in this company in December 2012, for $1,040.70 you would have bought 15 shares at $69.38 per share. In December 2022, after 10 years you would have received $487.50 in dividends. The stock would be worth $2,122.50. Your total return would have been $2,610.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $69.38 | $1,040.70 | 15 | 10 | $487.50 | $2,122.50 | $2,610.00 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.18%. The 5 and 10 year dividend yield are moderate at 2.88% and 2.08%. The historical median dividend yield is low (below 2%) at 1.70%. The dividend growth has recently been moderate (8% to 14% ranges) at 14.9% per year. The last dividend increase was in 2023 and it was for 6.15%. However, the company raised the dividends 25% in 2021.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 34% with 5 year coverage at 32%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 28% with 5 year coverage at 27%. The DPR for Cash Flow per Share (CFPS) for 2022 is 13% with 5 year coverage at 12%. The DPR for 2022 cannot be calculated because it is negative. Everyone seems to agree that it was negative last year. The 5 year coverage is 38%.
Some Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2022 is 0.42 and is low and good. The Liquidity Ratio for 2022 is good at 1.61. The Debt Ratio for 2022 is a bit low at 1.47 and I prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2022 are a bit high at 3.14 and 2.14 and I prefer to see them below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 34 to the end of 2022. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth. | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2017 | 5 | 17.81% | 0.06% | -2.90% | 2.96% |
| 2012 | 10 | 17.26% | 10.57% | 7.39% | 3.19% |
| 2007 | 15 | 14.84% | 6.59% | 4.40% | 2.20% |
| 2002 | 20 | 14.40% | 9.99% | 7.64% | 2.34% |
| 1997 | 25 | 11.37% | 8.15% | 6.26% | 1.89% |
| 1992 | 30 | 9.39% | 9.98% | 7.77% | 2.21% |
| 1988 | 34 | 9.88% | 8.34% | 6.45% | 1.88% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.86, 10.22 and 12.30. The corresponding 10 year ratios are 10.85, 12.59 and 14.70. The corresponding historical ratios are 10.27, 13.04 and 14.56. The current P/E Ratio is 9.02 based on a stock price of $165.12 and EPS estimate for 2023 of $18.30. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.61, 9.93 and 11.65. The corresponding 10 year ratios are 10.64, 12.48 and 14.56. The current ratio is 9.39 based on a stock price of $165.12 and AEPS estimate for 2023 of $17.59. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $196.31. The 10-year low, median, and high median Price/Graham Price Ratios are 0.87, 0.99 and 1.13. The current P/GP Ratio is 0.84 based on a stock price of $165.12. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Book Value per Share Ratio of 1.80. The current P/B Ratio is 1.70 based on a Book Value of $5,619M, Book Value per Share of $97.37 and a stock price of $165.12. The current ratio is 6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an estimate for the Book Value per Share for 2023 of $99.40. This implies a Book Value of $5,735M and a ratio of 1.66 with a stock price of $165.12. This ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.96. The current P/CF Ratio is 4.89 based on a stock price of $165.12, Cash Flow per Share estimate for 2023 of $33.80 and Cash Flow of $1,950M. The current ratio is 45% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.70%. The current dividend yield is 4.18% based on dividends of $6.90 and a stock price of $165.12. The current dividend yield is 146% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.08%. The current dividend yield is 4.18% based on dividends of $6.90 and a stock price of $165.12. The current dividend yield is 101% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.68. The current P/S Ratio is 0.53 based on Revenue estimate for 2023 of $17,830M, Revenue per Share of $309.01 and a stock price of $165.12. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests show the stock as very cheap, but as in a chart above, dividends are growing quite fast. The P/S Ratio test says that the stock price is cheap. Another of other tests point to the stock price as being cheap.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (7) and Underperform (1). The consensus would be a Buy. The 12 month stock price of is $198.82. This implies a total return of 24.59% with 4.18% from dividends and 20.41% from capital gains. The only negative comment is from Ross Healy saying we are heading into a recession and this will not help retailers. However, this stock has traditionally done well in recession because their products include stuff to fix your home and car. In tough times people tend towards fixing stuff.
One analyst thinks that retailers will be hurt by the coming recession, and this includes this stock he says on Stock Chase. Stock Chase gives this stock 4 stars out of 5. It is number 10 on the Money Sense list. Chris MacDonald on Motley Fool says this company has an exception year in 2022 and it will be increasing its dividend this year by 33%. Kay Ng on Motley Fool says this company has solid long term growth and is a buy at a 4.1% yield. The company put out a Press Release on their fourth quarter of 2022 results.
A Simply Wall Street report on Yahoo Finance says the current sell off is a buying opportunity. Simply Wall Street gives this stock 3 stars out of 5. It gives 3 warnings of debt is not well covered by operating cash flow; dividend of 4.12% is not well covered; significant insider selling over the past 3 months.
Canadian Tire sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories, and vehicle fuel. Aside from the namesake banner, stores operate primarily under the Mark's, SportChek, Party City, Atmosphere, and PartSource monikers. Additionally, the company owns Helly Hansen, a Norwegian sportswear and workwear brand, and operates and holds majority ownership of a financing arm (Canadian Tire Financial Services; 20% owned by Scotiabank) and a REIT (CT REIT; Canadian Tire owns about 70%). Its web site is here Canadian Tire Corp.
The last stock I wrote about was about was H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more. The next stock I will write about will be Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more on Wednesday, March 22, 2023 around 5 pm. Tomorrow on my other blog I will write about Canadian Banks .... learn more on Tuesday, March 21 around 5 pm.
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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment