Is Canadian Tire Corporation, Limited (TSE:CTC.A) Potentially Undervalued?
Canadian Tire Corporation, Limited (TSE:CTC.A), which is in the multiline retail business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$157 at one point, and dropping to the lows of CA$140. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Canadian Tire Corporation's current trading price of CA$140 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Canadian Tire Corporation’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Canadian Tire Corporation
What is Canadian Tire Corporation worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.45x is currently trading in-line with its industry peers’ ratio, which means if you buy Canadian Tire Corporation today, you’d be paying a relatively fair price for it. Furthermore, Canadian Tire Corporation’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Canadian Tire Corporation generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 24% over the next year, the near-term future seems bright for Canadian Tire Corporation. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CTC.A’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CTC.A? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on CTC.A, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for CTC.A, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Canadian Tire Corporation. You can find everything you need to know about Canadian Tire Corporation in the latest infographic research report. If you are no longer interested in Canadian Tire Corporation, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
