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% |
| Diluted EPS | $10.67 | $9.22 | 15.7% |
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.
