If there is perhaps only one company that can claim to be the most Canadian, it really has to be Canadian Tire (TSX:CTC.A). Sure, there are older companies, companies that have even been around since the 1600s! But when it comes to pure Canadianism, Canadian Tire stock has it.
But, does that mean it offers returns? Today, let’s look at what an investment would have looked like over the last decade. And even better, whether there is more to come in the years ahead.
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How much?
Canadian Tire stock offered a share price of $114 in July of 2014. Today, shares of the stock have risen only slightly to $136 as of writing. That’s an increase of just 19% in a decade.
Even so, if you had invested $1,000, that would have purchased about nine shares back in 2014. Fast forward, and today those shares are worth $1,224. So altogether, that $224 in returns isn’t exactly awe-inspiring.
What caused the slow growth
So why has growth been so slow for the stock? There are broad and company-focused reasons of course. The overall economic environment in Canada has seen periods of slow growth, which can impact consumer spending and retail performance. Factors such as fluctuating oil prices, changes in consumer confidence, and economic policies have all played a role in creating a challenging market for retailers like Canadian Tire.
The retail sector, particularly in brick-and-mortar stores, has faced significant challenges due to changing consumer behaviours and the rise of e-commerce. Canadian Tire has had to invest heavily in its online presence to compete, which has affected its profitability and stock performance.
As for the stock, while Canadian Tire has made several strategic acquisitions and investments to diversify its portfolio, the returns on these investments have varied. Some have been successful, while others have not yielded the expected growth, impacting overall stock performance.
Meanwhile, Canadian Tire has maintained a strong focus on paying dividends, which can attract income-focused investors but may limit capital available for growth initiatives. While dividends provide steady returns, they may also signal that the company is prioritizing stable, predictable income over-aggressive expansion or innovation.
Alright, and the future?
There are multiple factors here to consider. Canadian Tire is currently trading at a relatively low price-to-earnings (P/E) ratio, approximately 10.3 times its expected earnings for 2024, which is lower than its 5- and 10-year averages. This suggests the stock may be undervalued, presenting a potential buying opportunity for investors. Analysts expect Canadian Tire to see a rebound in earnings, with a forecasted 16.7% increase in normalized EPS for 2024 compared to 2023.
Plus, despite facing economic headwinds and a decline in earnings in 2023, Canadian Tire remains profitable. Analysts highlight the company’s strong market position and solid economic fundamentals, even as it navigates through challenging times.
And while shares are at $136, that’s down from 52-week highs at a whopping $190! So if you sold at those prices, your $1,000 would have turned into $1,710. While not insane growth, it’s about $500 more than today’s shares. And analysts believe that could certainly happen again soon.
Bottom line
So, is Canadian Tire stock worth your investment? Analysts believe so, with profitability and growth coming out of recent volatility in the markets. And with a 5.1% dividend yield, it certainly could be worth your time.
