Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio as February ends.

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The retail sector is an excellent space for Canadian investors to consider when looking for reliable investments to deliver good returns in the long run. To this end, Canadian Tire (TSX:CTC.A) can be a natural stock to consider.

As of this writing, the stock trades for a 25.23% discount from its 52-week high. CTC stock is an $8.26 billion market capitalization company operating in the automotive, hardware, sports, leisure, and housewares sectors.

While the retail industry has become primarily an online affair, this brick-and-mortar retailer is still a major force in the sector. Boasting a solid digital presence of its own, it boasts an extensive network of physical locations nationwide. Regardless of where you live in Canada, there is a Canadian Tire store at least within driving distance.

The retail stock has been a mainstay for decades and looks set to remain a solid investment for many more. While it has experienced a downturn in recent weeks, the company might be set for a much better performance on the stock market as cooling inflation and lower interest rates have their impact sometime this year.

Today, we will look at this stock to see why it might be a good holding to consider for your self-directed investment portfolio.

Canadian Tire

As of this writing, Canadian Tire stock trades for $141.91 per share, down from its $189.82 52-week high. At current levels, it pays its shareholders their dividends at a juicy 4.93% dividend yield. Trading near the same levels as five years ago, it might be arguably considered an undervalued stock. In the same period, the S&P/TSX Composite Index is up by a massive 33.26%.

The Canadian retailer might not boast the same level of business as its American counterpart, Home Depot, CTC stock is undoubtedly a favorite in the domestic market. The company also offers significantly more affordable wares, which make it a go-to option compared to others during recessionary environments.

Foolish takeaway

The last couple of years have seen Canadian Tire stock trade on a bearish note. The decline in its earnings has led to a decrease in its share prices.

While it might seem worrisome, the downturn in its share prices on the stock market has also inflated its dividend yield to almost 5%. 3034 saw the company’s year-over-year revenue slip by 6.5%, with its adjusted annual earnings decreasing by around 44.7% from the previous year.

However, the company’s investment in further capital expenditures can lead to positive financial growth in the coming years as macroeconomic jitters subside. The forward-thinking approach to investing in omnichannel solutions will help it keep pace with and grow with the changing retail market.

CTC stock might continue being volatile in the short run due to persisting inflation. However, the expected decrease in key interest rates later this year might provide it with the tailwinds it needs to come out of this slump.

Right now, CTC stock is too attractively priced to ignore if you want to capture sizeable long-term capital gains.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.

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