Canadian Tire (CTC.A) AI Stock Analysis

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Canadian Tire

(TSX:CTC.A)

Rating:77Outperform

Price Target:

C$188.00

▲(6.03%Upside)

Canadian Tire holds a robust financial position with strong profitability and effective cash management, supported by a consistent earnings call performance. The stock shows technical strength but faces potential short-term overbought risks. Its attractive valuation provides a buffer against market volatility. Key challenges include managing operating expenses and adapting to retail market uncertainties.

Positive Factors

Balance Sheet Improvement

The Helly Hansen divestiture is expected to improve the company's balance sheet.

Share Price Upside

If a trade war is averted or the outcome is less punitive than feared, there is potential share price upside of 20%.

Stock Repurchase

Recent stock repurchase activity suggests potential upside for investors.

Negative Factors

Analyst Preference

The stock ranks lower in the analyst's preferred order due to ongoing tariff concerns.

Economic Risks

A full-blown tariff war with the U.S. would be a significant negative for the Canadian economy.

Tariff Concerns

Discretionary spending may slow further due to tariff uncertainties.

Canadian Tire (CTC.A) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$9.94B

Dividend Yield3.94%

Average Volume (3M)329.10K

Price to Earnings (P/E)11.6

Beta (1Y)0.85

Revenue Growth-1.12%

EPS Growth201.58%

CountryCA

Employees13,973

SectorConsumer Cyclical

Sector Strength68

IndustrySpecialty Retail

Share Statistics

EPS (TTM)2.00

Shares Outstanding51,417,793

10 Day Avg. Volume262,486

30 Day Avg. Volume329,096

Financial Highlights & Ratios

PEG Ratio-2.45

Price to Book (P/B)1.55

Price to Sales (P/S)0.00

P/FCF Ratio9.25

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$169.73

Price Target Upside-4.27% Downside

Rating ConsensusModerate Buy

Number of Analyst Covering9

Canadian Tire Business Overview & Revenue Model

Company DescriptionCanadian Tire Corporation, Limited (CTC.A) is a prominent retail company in Canada, operating a diverse range of businesses across various sectors. Founded in 1922, Canadian Tire is best known for its retail stores offering a wide assortment of automotive, hardware, sports, leisure, and household products. The company also owns and operates other retail banners, including Mark's, FGL Sports (Sport Chek), and PartSource, providing clothing, footwear, and sporting goods. Additionally, Canadian Tire has a financial services division that offers credit cards, personal loans, and insurance products.

How the Company Makes MoneyCanadian Tire primarily generates revenue through its extensive network of retail stores, which sell a broad range of products. The company's key revenue streams include the sale of automotive parts and accessories, hardware and home improvement items, sports and leisure equipment, and clothing and footwear. Canadian Tire also earns significant income from its financial services division, which offers credit cards that generate revenue through interest and fees. The company's retail operations benefit from its loyalty program, Triangle Rewards, which encourages customer retention and repeat purchases. Additionally, Canadian Tire's real estate investments contribute to its earnings, as it owns and manages a substantial portfolio of commercial properties. Strategic partnerships and exclusive brand agreements further enhance its product offerings and competitive positioning in the Canadian retail market.

Canadian Tire Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: 15.74%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call reflected strong financial performance and strategic growth initiatives, particularly through the True North strategy and enhanced loyalty and e-commerce efforts. However, uncertainties in the retail environment and anticipated increases in operating expenses and freight costs present challenges.

Q1-2025 Updates

Positive Updates

Strong EPS Growth

Consolidated EPS of $2.18, significantly up from last year due to sales growth, managed margins, and disciplined operations.

Positive Sales Momentum

Retail sales were up 4.7%, with notable growth in discretionary spending, which was positive for the first time in three years.

Loyalty Program Success

Triangle loyalty program showed increased customer engagement, with loyalty penetration at 54.5% on a rolling 12-month basis.

SportChek and Mark's Banner Performance

SportChek sales increased by 6.3% and Mark's by 2.2%, showing strong growth in specific categories.

Robust Financial Position

The company announced the sale of Helly Hansen, delivered earnings growth to retail ROIC above 10%, and reinitiated buybacks.

E-commerce Growth

E-commerce growth outpaced bricks and mortar, driven by improved online experiences and expanded delivery options.

Negative Updates

Retail Environment Uncertainty

The retail environment remains uncertain, with unpredictable consumer behavior impacting forecasts.

Increased Operating Expenses

Expected increase in operating expenses by $60 million for 2025, primarily for IT investments and transformation initiatives.

Potential Freight Cost Headwinds

Freight was a tailwind in Q1, but is expected to become a headwind from Q2 due to higher freight rates.

Inventory Management Challenges

Despite efforts to manage inventory, dealer inventory was down 2%, indicating potential future restocking challenges.

Company Guidance

During the Canadian Tire Corporation's Q1 2025 earnings call, the company reported a significant increase in consolidated earnings per share (EPS), reaching $2.18, which marks a substantial improvement from the previous year. The retail segment experienced a 4.7% increase in comparable sales, outpacing the 4% rise in retail revenue. The Triangle loyalty program showed notable momentum with a 54.5% loyalty penetration. The company also highlighted a strong retail gross margin of 36.1%, up 19 basis points year-over-year, and a normalized retail EBITDA growth of nearly 13% to $334 million. The company's credit card segment reported a gross average account receivables (GAAR) growth of 1.6%, with eCTM issuance to cardholders up 7% year-over-year. The call emphasized the successful management of margins and a strategic focus on the "True North" transformation strategy aimed at enhancing customer experiences and leveraging data-driven insights for growth.

Canadian Tire Financial Statement Overview

Summary

Canadian Tire exhibits solid profitability and effective cash flow management, underpinned by stable margins and cash conversion metrics. While the balance sheet shows a manageable level of leverage, the company must address its recent revenue decline and negative free cash flow growth to sustain long-term financial health.

Income Statement

Positive

The income statement shows a stable gross profit margin at approximately 33.7% for TTM (Trailing-Twelve-Months), indicating strong cost management. However, the revenue growth has been fluctuating, with a slight decrease in the recent TTM period. Net profit margin has been consistent at around 5.2%, with a healthy EBIT margin of 8.1%. The EBITDA margin remains robust at 13.0%. Overall, the company demonstrates profitability and efficient operations, though recent revenue contraction poses a concern.

Balance Sheet

Positive

The balance sheet reflects a moderate debt-to-equity ratio of 1.42, suggesting a balanced capital structure. The equity ratio stands at 26.3%, showing a reasonable level of financial leverage. Return on equity is decent at 14.2%, driven by solid profitability. However, the relatively high leverage requires careful management to mitigate potential risks.

Cash Flow

Positive

The cash flow statement indicates a strong operating cash flow to net income ratio of 1.9, highlighting efficient cash generation relative to earnings. The free cash flow to net income ratio is 1.17, signifying healthy free cash flow generation. However, free cash flow growth has been negative recently, impacting overall cash flow performance.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
16.29B	16.36B	16.66B	17.81B	16.29B	14.87B
	Gross Profit
5.49B	5.62B	5.38B	6.10B	5.84B	5.08B
	EBIT
1.32B	1.30B	1.26B	1.67B	1.79B	1.27B
	EBITDA
2.12B	2.13B	1.48B	2.58B	2.64B	2.14B
	Net Income Common Stockholders
848.10M	887.70M	213.30M	1.04B	1.13B	751.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
464.40M	575.90M	488.40M	490.10M	2.34B	1.93B
	Total Assets
21.98B	22.24B	21.98B	22.10B	21.80B	20.38B
	Total Debt
8.81B	7.91B	8.81B	7.72B	7.09B	7.16B
	Net Debt
8.53B	7.46B	8.50B	7.41B	5.35B	5.87B
	Total Liabilities
15.53B	15.15B	15.53B	15.06B	15.29B	14.54B
	Stockholders Equity
5.55B	6.16B	5.55B	5.62B	5.12B	4.50B
Cash Flow		Free Cash Flow
993.10M	1.43B	685.10M	-268.60M	1.04B	2.01B
	Operating Cash Flow
1.61B	2.06B	1.35B	566.00M	1.81B	2.44B
	Investing Cash Flow
-322.20M	-264.10M	-747.80M	-329.90M	-736.50M	-848.00M
	Financing Cash Flow
-1.48B	-1.64B	-621.00M	-1.66B	-653.40M	-462.70M

Canadian Tire Technical Analysis

Technical Analysis Sentiment

Positive

Last Price177.30

Price Trends

50DMA

155.61

Positive

100DMA

152.94

Positive

200DMA

152.01

Positive

Market Momentum

MACD

5.82

Negative

RSI

80.92

Negative

STOCH

83.43

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CTC.A, the sentiment is Positive. The current price of 177.3 is above the 20-day moving average (MA) of 167.81, above the 50-day MA of 155.61, and above the 200-day MA of 152.01, indicating a bullish trend. The MACD of 5.82 indicates Negative momentum. The RSI at 80.92 is Negative, neither overbought nor oversold. The STOCH value of 83.43 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CTC.A.

Canadian Tire Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PET	78 Outperform	C$2.21B	24.49	99.31%	1.46%	4.61%	3.95%
CTC.A	77 Outperform	$9.94B	11.56	14.70%	3.94%	-1.12%	201.58%
LNF	73 Outperform	C$1.95B	12.18	14.49%	2.75%	0.47%	9.41%
GBT	65 Neutral	C$421.14M	14.30	5.95%	2.76%	5.97%	174.18%
Sector *	62 Neutral	$6.83B	11.28	2.95%	3.88%	2.70%	-24.56%

* Consumer Cyclical Sector Average

Performance Comparison

TSE:CTC.A

Canadian Tire

177.30

44.62

33.63%

TSE:GBT

BMTC Group Inc.

12.90

0.26

2.06%

TSE:LNF

Leon's Furniture

28.08

6.37

29.34%

TSE:PET

Pet Valu Holdings Ltd.

31.10

5.05

19.39%

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.