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North West Company (TSE:NWC)
TSX:NWC
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North West
(TSX:NWC)
69Neutral
Positive Factors
Community Support Programs
Settlement payments and infrastructure spending in Northern Canadian communities are expected to be key demand drivers, positively impacting communities served by North West's stores.
Financial Performance
Adj. EBITDA of $88.4mm was above consensus of $81.9mm, driven by higher-than-expected gross margin.
Stock Valuation
North West Company trades at a discount to its long-term average, with further potential for multiple expansion upside.
Negative Factors
North West (NWC) vs. S&P 500 (SPY)
Market Cap
C$2.21B
Dividend Yield3.42%
Average Volume (3M)110.25K
Price to Earnings (P/E)17.0
Beta (1Y)0.37
Revenue Growth3.28%
EPS Growth1.42%
CountryCA
Employees7,382
SectorUtilities
Sector Strength83
IndustryRetailers - Staples
Share Statistics
EPS (TTM)2.74
Shares Outstanding47,871,258
10 Day Avg. Volume93,165
30 Day Avg. Volume110,253
Financial Highlights & Ratios
PEG Ratio11.96
Price to Book (P/B)N/A
Price to Sales (P/S)0.88
Price to Cash Flow (P/CF)11.50
P/FCF Ratio38.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$71.37Price Target Upside54.61% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
North West Business Overview & Revenue Model
Company DescriptionThe North West Co Inc is a Canada-based company that is principally engaged in retail business in underserved rural communities and urban neighborhoods. The company provides food, family apparel, housewares, appliances, and outdoor products, with food products accounting for the majority of the company's revenue. The company also offers services, including post offices, income tax return preparation, money transfers, commercial business sales and others. The company operates business in Northern Canada, Western Canada, rural Alaska, the South Pacific islands, and the Caribbean, with around two thirds of the company's total revenue coming from the Canadian market.
How the Company Makes MoneyNorth West Company makes money primarily through the sale of groceries and general merchandise at its retail locations. The company's revenue streams include direct sales from its network of stores, which cater to underserved and remote communities. NWC leverages its strategic supply chain and logistics capabilities to manage costs and ensure the availability of products in challenging environments. Additionally, the company benefits from close relationships with local communities and governments, which can enhance market penetration and customer loyalty. Furthermore, NWC might enter into partnerships with local businesses and authorities to expand its service offerings and improve infrastructure, thereby creating additional revenue opportunities.
North West Financial Statement Overview
Summary
North West demonstrates a solid financial position with consistent revenue growth, healthy profit margins, and efficient cash flow management. The company maintains a stable balance sheet with moderate leverage, though increasing debt levels need monitoring. Overall, North West appears financially sound with steady growth prospects in the retail staples sector, balanced by potential operational and leverage challenges.Income Statement
North West's income statement shows solid profitability with a gross profit margin of 31.15% and a net profit margin of 5.14% for TTM. Revenue growth is steady at 2.95% annually from 2023 to 2024, indicating a stable trajectory. EBITDA and EBIT margins are healthy at 12.34% and 7.88%, respectively, demonstrating efficient cost management. However, the decline in EBIT from 2022 highlights potential challenges in maintaining operational efficiency.75
Positive
Balance Sheet
The balance sheet reflects a relatively balanced financial structure with a debt-to-equity ratio of 0.60, indicating moderate leverage. The equity ratio stands at 49.37%, signifying a strong equity base. ROE is modest at 17.76%, suggesting decent shareholder returns. The increase in stockholders' equity over the years points to financial strengthening, although the rising debt levels warrant attention.70
Positive
Cash Flow
The cash flow statement shows a stable operating cash flow to net income ratio of 1.81 for TTM, indicating robust cash generation relative to profits. Free cash flow growth is positive, with a 6.76% increase from 2023 to 2024. However, the declining free cash flow to net income ratio of 0.77 suggests potential constraints on cash available for expansion or debt repayment. The consistency in operating cash flow is a strength, though vigilance on capital expenditures is advised.68
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 2.54B | 2.47B | 2.35B | 2.25B | 2.36B | 2.09B | Gross Profit |
| 792.69M | 704.14M | 747.91M | 737.75M | 774.55M | 664.40M | EBIT |
| 200.50M | 195.90M | 180.31M | 220.43M | 209.35M | 130.35M | EBITDA |
| 314.07M | 301.40M | 278.99M | 311.46M | 301.05M | 219.57M | Net Income Common Stockholders |
| 130.69M | 129.39M | 122.19M | 154.80M | 139.87M | 82.72M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 66.99M | 53.36M | 58.81M | 49.43M | 71.54M | 28.19M | Total Assets |
| 1.49B | 1.40B | 1.34B | 1.22B | 1.19B | 1.22B | Total Debt |
| 440.00M | 405.47M | 402.53M | 349.71M | 402.04M | 550.07M | Net Debt |
| 373.02M | 352.11M | 343.72M | 300.28M | 330.50M | 521.88M | Total Liabilities |
| 734.90M | 690.24M | 688.99M | 639.07M | 685.94M | 788.57M | Stockholders Equity |
| 736.06M | 684.69M | 629.22M | 563.63M | 491.30M | 413.90M |
| Cash Flow | Free Cash Flow | ||||
| 100.61M | 107.02M | 65.73M | 130.06M | 263.47M | 39.51M | Operating Cash Flow |
| 235.99M | 230.43M | 182.84M | 224.13M | 338.72M | 161.12M | Investing Cash Flow |
| -119.98M | -107.70M | -106.80M | -75.86M | -66.90M | -104.27M | Financing Cash Flow |
| -121.96M | -128.27M | -68.30M | -170.20M | -227.06M | -67.24M |
North West Technical Analysis
Neutral
46.16
Price Trends
46.83
Negative
49.09
Negative
46.89
Negative
Market Momentum
-0.05
Negative
50.42
Neutral
39.49
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:NWC, the sentiment is Neutral. The current price of 46.16 is below the 20-day moving average (MA) of 46.49, below the 50-day MA of 46.83, and below the 200-day MA of 46.89, indicating a neutral trend. The MACD of -0.05 indicates Negative momentum. The RSI at 50.42 is Neutral, neither overbought nor oversold. The STOCH value of 39.49 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:NWC.
North West Peers Comparison
Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | C$10.23B | 16.46 | 12.33% | 1.73% | 0.31% | -7.47% | |
80 Outperform | C$20.46B | 22.30 | 13.78% | 1.44% | 1.59% | -1.98% | |
76 Outperform | C$65.98B | 18.95 | 18.67% | 1.03% | 7.57% | -12.56% | |
69 Neutral | C$2.21B | 17.02 | 18.50% | 3.42% | 3.28% | 1.42% | |
65 Neutral | $11.99B | 15.63 | 6.50% | 4.40% | 7.00% | 0.55% |
* Utilities Sector Average
Performance Comparison
TSE:NWC
North West
46.76
9.56
25.70%
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129.72
19.58
17.78%
DLMAF
Dollarama
104.08
26.96
34.96%
TSE:ATD
Alimentation Couche-Tard Inc
69.62
-12.16
-14.87%
TSE:EMP.A
Empire Co Cl A NV
44.45
12.18
37.74%
TSE:MRU
Metro Inc.
93.36
20.45
28.05%
North West Earnings Call Summary
Earnings Call Date: Dec 10, 2024 | % Change Since: -10.80% | Next Earnings Date: Mar 13, 2025
Earnings Call Sentiment Neutral
The earnings call presented a strong performance in Canadian operations and effective expense management, contributing to significant financial growth. However, international operations faced economic challenges and inflationary pressures, with uncertainties affecting the future outlook.Highlights
Strong Canadian Operations Performance
Sales in Canada increased by 9.5% in total and 10.1% on a same-store basis, driven by a 9% increase in same-store sales and 16% increase in general merchandise same-store sales.
Consolidated Financial Growth
Consolidated sales were up 5.1%, and net earnings increased by 26%. Gross profit increased by 10% in dollars and 148 basis points as a rate of sales.
North Star Air Success
North Star Air experienced both top and bottom line growth, driven by increases in third-party cargo contracts and higher charter passenger volumes.
Expense Management
Expenses were well-controlled with only a 10 basis point increase as a rate to sales despite inflationary pressures, contributing to a 24% increase in EBIT and an 18.8% increase in EBITDA.
Lowlights
International Operations Challenges
International operations faced economic headwinds with a total sales decrease of 2.6% and a 2.7% decrease on a same-store sales basis. This was due to lower SNAP benefits and Alaska Permanent Fund dividend payments.
Impact of Inflation and Economic Conditions
Inflationary cost pressures affected demand and shopping patterns, with customers prioritizing spending on food and having less disposable income for discretionary purchases.
Uncertainty in Fourth Quarter Outlook
Fourth quarter results are expected to be below the strong third quarter results. Uncertainties include the continuation of government relief payments and the anticipated higher effective tax rate.
Company Guidance
During the earnings call for The North West Company Inc., guidance for the upcoming quarter was provided with a cautious outlook. While the third quarter saw a strong performance with consolidated sales increasing by 5.1% and net earnings up by 26%, the company anticipates the fourth quarter results to be in line with the previous year's fourth quarter but below the exceptional third quarter results. This outlook is influenced by several headwinds, including the uncertain continuation of government inflation relief payments, a higher effective tax rate, and reduced third-party cargo and charter revenue. However, potential tailwinds such as lapping the previous year's inflation impact on gross profit rate and anticipated consumer demand from First Nations drinking water settlement payments may help offset some challenges. Despite these uncertainties, the company remains committed to operational excellence and strategic initiatives to drive long-term growth and efficiency.North West Corporate Events
North West Reports Q3 Sales Growth and Dividend
Dec 10, 2024
The North West Company Inc. reported a 3.3% increase in third-quarter sales to $637.5 million, driven by same-store sales growth and new store openings. Despite higher expenses leading to a decline in net earnings compared to last year, the company declared a quarterly dividend of $0.40 per share. The company remains optimistic about its Next 100 operational excellence initiatives to counteract challenging economic conditions.
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.