One Canadian retail play I’ve commented on in the past as a potential value pick for investors is Canadian Tire Corporation (TSX:CTC.A). In this article I’m going to discuss the pros and cons of this investment in the context of the company’s value proposition stay .
From a fundamental’s standpoint, Canadian Tire appears to be cheap on the surface, with a forward price to earnings ratio of approximately 10. This valuation is relatively inexpensive when compared to some of the company’s retail peers.
With a stable of well recognized brands and company banners, one might expect a nice pop when retail COVID-related restrictions are eventually lifted. That said, with no real end in site to social distancing regulations, Canadian Tire’s stock price has been mired by a relatively slow transition to online sales, particularly in contrast to its peers such as Aritzia Inc. (TSX:ATZ).
The argument could thus be made that at these levels, Canadian Tire could be a value trap, particularly if social distancing measures stay in place for a significantly longer time and online sales cannot fully replace lost in store sales.
I remain on the sidelines for now with respect to the stock but will be watching the company’s upcoming quarterly earnings reports closely in 2021 to see if material changes warrant a change of opinion on this stock.
Invest wisely, my friends.