With all the headwinds the economy has faced over the last year and a half, the investing environment certainly has been difficult for investors. The good news, though, is that now, after a year in which many stocks saw impacts on their operations, there are plenty of cheap stocks with significant growth potential to buy.
One of the top stocks that has become ultra-cheap lately is Canadian Tire (TSX:CTC.A), one of the best-known brands and most popular retailers across the country.
And when it comes to Canadian Tire, not only can you buy the growth stock at a significant discount, but because it pays an attractive dividend and the stock has become dirt-cheap, the yield that it offers today is quite compelling.
So if you’ve got cash in your portfolio that you’re looking to put to work, here’s why Canadian Tire is one of the best growth stocks to buy right now.
Image source: Getty Images
Canadian Tire has been negatively impacted by the economy, but this shouldn’t last forever
2023 was a tough year for Canadian Tire as well as many retail stocks across Canada. With both inflation and higher interest rates impacting the discretionary income that Canadians can spend, many were anticipating a significant impact on retail companies’ operations.
In Canadian Tire’s case, the stock saw its revenue fall by 6.5% in 2023, only the second year since the recession in 2008, when the multiline retailer’s sales fell year over year.
Plus, in addition to the impact on sales, Canadian Tire’s profitability was also impacted quite significantly, as you would expect. In fact, its normalized earnings per share (EPS) declined by nearly 50% in 2023, from $18.75 in 2022 to $10.37 in 2023.
So, after such a tough year, it’s not surprising to see Canadian Tire trading right around its 52-week low and nearly 30% off its all-time high.
Now, though, with the stock trading so cheaply and many investors and analysts believing that the worst is behind us, there is a significant opportunity for investors to buy Canadian Tire now and hold the growth stock for the long haul.
After a tough 2023, Canadian Tire is one of the best growth stocks to buy right now
With 2023 now in the rearview and Canadian Tire’s fourth-quarter earnings showing some signs of improvement in the retail environment, 2024 could see the stock rebound significantly, creating a major opportunity for investors.
Analysts expect that Canadian Tire stock will return to growth with roughly 1% in revenue growth anticipated. More importantly, though, analysts expect its normalized EPS to recover by 15%, to just shy of $12.
Of course, these are but estimates, and a lot of Canadian Tire’s recovery potential will be based on how well the economy can recover and how soon consumers start to increase their discretionary spending again.
The good news for investors, though, is that Canadian Tire has proven to be a reliable business over the long haul. So you can have confidence buying the growth stock dirt-cheap today and holding for years.
Plus, as I mentioned before, it pays an attractive dividend, which currently yields just under 5.1%. So you can begin to earn returns immediately, regardless of how soon Canadian Tire’s operations recover and its share price begins to rally.
And even with all these impacts on revenue and profitability, the dividend still has a significant margin of safety. For example, even after Canadian Tire’s normalized EPS fell by nearly 50% in 2023 to $10.37 – that still easily exceeds the $7 annual dividend per share that Canadian Tire pays.
So if you’re looking for a high-quality growth stock to buy now and hold for the long haul, Canadian Tire is certainly one of the top stocks for investors to consider today.
