Is There Now An Opportunity In Canadian Tire Corporation Limited (TSE:CTC.A)?
Canadian Tire Corporation Limited (TSX:CTC.A), a multiline retail company based in Canada, maintained its current share price over the past couple of month on the TSX, with a relatively tight range of CA$156 to CA$167.91. However, does this price actually reflect the true 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’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Canadian Tire
Is Canadian Tire still cheap?
According to my valuation model, Canadian Tire seems to be fairly priced at around 5% below my intrinsic value, which means if you buy Canadian Tire today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$176.26, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Canadian Tire’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Canadian Tire?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Canadian Tire’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Canadian Tire’s optimistic future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on Canadian Tire, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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. You can find everything you need to know about Canadian Tire in the latest infographic research report. If you are no longer interested in Canadian Tire, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
