Canadian Tire (TSX:CTC.A) Could Be a Massive Winner in 2021

Canadian Tire (TSX:CTC.A) is a fantastic retailer that could still have much more room to run ahead of a discretionary spending boom!

| More on:
sad concerned deep in thought

Image source: Getty Images

Canadian Tire (TSX:CTC.A) is an iconic Canadian company that’s finally starting to get the respect that it so rightfully deserves. The retailer defied the shorts and the bearish pundits through the worst of the COVID-19 pandemic. As a result, shares of Canadian Tire are now flirting with new all-time highs not seen in years. As the company looks to build upon its e-commerce strength in the post-pandemic era, I think shares have much more room to run on the back of a potential discretionary spending boom.

The perfect reopening play

Mr. Market pulled the rug from underneath Canadian Tire shareholders back in February and March of 2020. Shares were already under pressure going into 2020, and the coronavirus market crash just served as salt in the iconic Canadian retailer’s wounds. In a matter of weeks, Canadian Tire stock crumbled like a paper bag, nosediving an unprecedented 45%.

Things were ugly for retail investors in the heat of the moment. It was excruciating. There’s no doubt about that. But if you listened to the fundamentals, you probably found it made a tonne of sense to stand by the retailer in spite of what the markets were telling you in its moment of panic-induced inefficiency.

A rock-solid balance sheet

Canadian Tire had a pristine balance sheet. As such, there was a minimal risk that the retailer would roll over at the hands of COVID-19 lockdowns. The company was just too liquid to sink during the worst of the COVID-19 crisis — a major reason why I praised CT REIT, a REIT that houses Canadian Tire locations, as a robust income play to buy in the heat of the coronavirus crisis.

To this day, Canadian Tire’s balance sheet continues to be impeccable. The firm has more than enough liquidity to take advantage of acquisition opportunities while still being able to fend off another several waves worth of lockdowns. With federal regulators taking action to avoid a mutated variant outbreak, the risks of further lockdowns, while unlikely, shouldn’t be ruled out completely by investors.

CTC.A stock is a great reopening trade that won’t fold should this pandemic take a turn for the worst before it’s finally eliminated. At the time of writing, Canadian Tire boasts a 1.41 quick ratio and a 1.91 current ratio, making it one of the most liquid retailers out there.

The next omnichannel king?

Not only did Canadian Tire have a rock-solid balance sheet, but the firm also spent a considerable amount on beefing up its e-commerce platform. The company experienced an unprecedented surged in online sales amid the worst of the pandemic.

As COVID-19 dies down and people head back to the shopping malls, I suspect Canadian Tire will rise out in a position of profound strength. The company will likely find itself firing on all cylinders, both on and offline. That makes the discretionary retailer one of the most attractive ways to play a post-pandemic discretionary spending boom.

Foolish takeaway

Canadian Tire stock is still too cheap at 0.7x sales, given its progress and the probable spending boom that lies ahead.

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 Joey Frenette has no position in any of the stocks mentioned.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »