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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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 Joseph Solitro has no position in any stocks mentioned.