4 Reasons to Buy Canadian Tire Corporation Limited Right Now | The Motley Fool Canada

4 Reasons to Buy Canadian Tire Corporation Limited Right Now | The Motley Fool Canada: "Canadian Tire Corporation Limited (TSX:CTC.A), one of Canada’s largest retailers of general merchandise, automotive products, sporting goods, apparel, and fuel, has widely outperformed the overall market in 2015, rising more than 1.5% as the S&P/TSX Composite Index has fallen over 8%, and I think it will continue to do so over the next several years. Let’s take a look at four of the primary reasons why I think this will happen and why you should be a long-term buyer of the stock today.

1. Its strong earnings results could support continued rally

On November 12, Canadian Tire released very strong earnings results for its 13- and 39-week periods ended on October 3, 2015, and its stock has responded by rising nearly 10% in the trading sessions since. Here’s a summary of 10 of the most notable statistics from the first 39 weeks of fiscal 2015 compared with the same period in fiscal 2014:

Net income attributable to owners of Canadian Tire Corporation increased 5.2% to $434.2 million
Diluted earnings per share increased 9% to $5.62
Total revenue increased 1% to $8.9 billion
Same-store sales increased 3.6% at Canadian Tire, 6.8% at FGL Sports, and 2.6% at Mark’s
Gross profit increased 4.4% to $2.96 billion
Gross margin improved 100 basis points to 33.2%
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 11.3% to $1.04 billion
Adjusted EBITDA margin improved 100 basis points to 11.7%
Cash generated from operating activities increased 17.3% to $735.6 million
Weighted-average number of common and Class A non-voting shares outstanding decreased 3.5% to 77.19 million
2. It trades at inexpensive forward valuations

At today’s levels, Canadian Tire’s stock trades at 15.5 times fiscal 2015’s estimated earnings per share of $8.04 and 14.5 times fiscal 2016’s estimated earnings per share of $8.59, both of which are inexpensive given its 6.5% long-term growth rate and the industry average price-to-earnings multiple of 28.4.

I think Canadian Tire’s stock could consistently command a fair multiple of at least 18, which would place its shares upwards of $154 by the conclusion of fiscal 2016, representing upside of more than 23% from current levels.

3. It has been repurchasing its shares

Canadian Tire has been actively repurchasing its Class A non-voting shares over the last few years, including 2.6 million shares for a total cost of approximately $290.6 million in fiscal 2014 and 2.54 million shares for a total cost of approximately $322.3 million in the first 39 weeks of fiscal 2015.

Also, on November 12 the company announced that its board of directors approved a $550 million share-repurchase program, which it expects to complete by the end of 2016.

This repurchase activity will help boost Canadian Tire’s earnings-per-share growth going forward and make its remaining shares more valuable than ever.

4. It is a dividend-growth play

Canadian Tire pays a quarterly dividend of $0.575 per share, or $2.30 per share annually, giving its stock a 1.8% yield. This 1.8% yield may not seem impressive at first, but it is very important to note that the company has raised its dividend for five consecutive years, and its 9.5% increase announced on November 12 puts it on pace for 2016 to mark the sixth consecutive year with an increase."



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