Inflate Your Portfolio With Canadian Tire Corporation Limited

Canadian Tire Corporation Limited (TSX:CTC.A) is oversold at current levels.

| More on:
The Motley Fool

Canadian Tire Corporation Limited (TSX:CTC.A) is an iconic Canadian company that has performed quite impressively for investors over the years. The retail giant has posted year-to-date stock price growth of more than 7%, despite dropping more than 13% from its peak last month.

Earnings beats

Last month, the retailer announced its quarterly net income rose by more than 26%, supported by the company’s growing financials division, which includes a range of credit products, including company credit cards, insurance options, and warranty products.

Canadian Tire’s top-line revenue numbers also improved by more than 7% year over year with both key metrics beating analyst expectations.

Despite the large year-over-year increase in revenue and net income, the company’s stock price took a nose dive, dropping more than 13% to today’s level since the earnings release in early May.

New e-commmerce initiatives

Canadian Tire has also been very vocal of late about its e-commerce initiatives which include home delivery for some of the company’s banners, including FGL Sports and Mark’s Work Warehouse, with home delivery coming for the company’s other banners soon.

With over 30 e-commerce initiatives underway, Canadian Tire will be focusing on its rollout of home delivery for its main banner later this year — an initiative the company hopes will help fend off threats from major American retailers such as Amazon.com, Inc. and Wal-Mart Stores Inc., which have entered the Canadian market en masse.

While the overall outcome of these initiatives remains to be seen, it appears Canadian Tire is doing a good job of maintaining its moat in the seasonal necessities segment, one which is hard to define yet important for Canadians — 90% of whom live within 15 minutes of a Canadian Tire store.

Bottom line

The top- and bottom-line earnings beats combined with the company’s e-commerce initiatives are very bullish indicators of the company’s ability to churn out profits and generate growth in the long term, in my opinion.

The fact that the company’s stock price could take such a hit in a short period of time after posting incredible numbers is indicative of at trend I have noticed of late, in which good companies that post earnings beats actually decline on the news, based on some other metric which takes centre stage for investors.

Other analysts have pointed to margin weakness within the central Canadian Tire brand compared with its other brands such as FGL Sports, Mark’s Work Warehouse, and Sport Chek, which outperformed the traditional banner.

However, when looking at the entity as a whole, which is likely to include additional bolt-on acquisitions in the future, I remain convinced that Canadian Tire is oversold and a real value play at current levels.

Stay Foolish, my friends.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon.

More on Dividend Stocks

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »