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Tim Hortons AŞ Message Board

  • catsaunders catsaunders Feb 5, 2013 12:52 PM Flag

    Tid Bits from Fool Boys Article

    Well written, and positive!
    The Opportunity in Tim Hortons

    Tim Hortons is a Canadian coffee and quick service restaurant chain with room to expand. Canada is nowhere near the size of the U.S., with a small population around 35 million. As of Jan. 1 of last year, the company had 3,295 restaurants in Canada, and only 714 in the U.S.

    In Q3 2012, Canada generated $473.6 million [CAD] in operating income, while its U.S. operations generated $11.8 million [CAD]. In the first three quarters of 2012, the company opened 44 new stores in the U.S. It posted U.S. same-store sales growth of 2.3% in Q3 -- 40 basis points higher than Canadian same-store sales growth in the same time period. In Canada, the company is already a dominant firm, and over the coming decade, it will be forced to venture deeper into the U.S. if it wants to achieve significant growth.

    The firm has good financials, with a total debt-to-equity ratio of 0.4, a profit margin of 13.1%, and a gross margin of 28.4%. Its ROI of 24.8% is also respectable. The company trades at a P/E ratio of just 19.4, which is cheap considering the positive long-term growth profile.

    Tim Hortons has already developed a nationally recognized brand name in Canada, and with determination, it will be able to do the same in the U.S. For long-term investors, Tim Hortons is a good company to watch, as it expands its operations and continues to operate within its core competencies of quality hot food and coffee.

    Of the three companies discussed above, Tim Hortons provides the most unique growth opportunity. Its Canadian operations are a profitable base for the company. These earnings can be plowed into Tim Hortons' U.S. operations to drive growth. Perhaps most importantly, Tim Hortons is much smaller than Starbucks -- and it doesn't have to abandon its coffee culture to find growth.

    Sentiment: Strong Buy