Canadian Tire Corporation Limited (TSX:CTC.A), one of Canada’s largest retailers, announced its fiscal 2017 fourth-quarter and full-year earnings results this morning, and its stock has responded by soaring over 5% in early trading. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today.
The results that ignited the rally
Here’s a breakdown of six of the most notable statistics from Canadian Tire’s 13-week period ended December 30, 2017, compared with its 13-week period ended December 31, 2016:
|Metric||Q4 2017||Q4 2016||Change|
|Retail sales||$4,599.3 million||$4,383.5 million||4.9%|
|Revenue||$3,964.0 million||$3,641.0 million||8.9%|
|Gross profit||$1,393.9 million||$1,296.7 million||7.5%|
|Adjusted EBITDA||$558.5 million||$506.6 million||10.2%|
|Net income attributable to shareholders of Canadian Tire||$275.7 million||$246.8 million||11.7%|
|Diluted earnings per share (EPS)||$4.10||$3.46||18.5%|
And here’s a breakdown of six notable statistics from Canadian Tire’s 52-week period ended December 30, 2017, compared with its 52-week period ended December 31, 2016:
|Metric||Fiscal 2017||Fiscal 2016||Change|
|Retail sales||$14,980.7 million||$14,370.6 million||4.2%|
|Revenue||$13,434.9 million||$12,681.0 million||5.9%|
|Gross profit||$4,638.4 million||$4,392.5 million||5.6%|
|Adjusted EBITDA||$1,693.8 million||$1,561.8 million||8.5%|
|Net income attributable to shareholders of Canadian Tire||$735.0 million||$669.1 million||9.9%|
What should you do with Canadian Tire’s stock today?
It was an outstanding quarter and year for Canadian Tire, highlighted by EPS growth of over 15%, so I think the market has responded correctly by sending its stock soaring; I also think the stock still represents a very attractive investment opportunity for the long term for two primary reasons.
First, it’s still attractively valued. Even after the +5% pop, Canadian Tire’s stock trades at just 16.2 times fiscal 2017’s diluted EPS of $10.67 and only 14.9 times the consensus estimate of $11.56 for fiscal 2018, both of which are inexpensive given its strong growth rates and its targeted annual EPS growth of 10% or more through 2020.
Second, it’s a dividend aristocrat. Canadian Tire pays a quarterly dividend of $0.90 per share, representing $3.60 per share annually, which gives it a solid 2.1% yield. It’s also very important to note that the retail giant’s 38.5% dividend hike in November has it on track for 2018 to mark the eighth straight year in which it has raised its annual dividend payment, and I think its very strong financial performance will allow this streak to continue for decades.
With all of the information provided above in mind, I think Foolish investors seeking exposure to the retail industry should consider Canadian Tire to be one of the best investment options in the market today.
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Fool contributor Joseph Solitro has no position in any stocks mentioned.