Why Canadian Tire Corporation Is At Least 12% Undervalued

This past week, shares of iconic Canadian retailer Canadian Tire Corporation Limited (TSX:CTC.A) soared more than 7% following an earnings report which beat analyst expectations and revised many investor and analyst expectations with respect to how traditional bricks and mortar retailers such as Canadian Tire will be able to fare in a brave new e-commerce world driven by industry behemoths such as Amazon.com, Inc. (NASDAQ:AMZN).

The earnings release was the second such earnings beat in a row, a beat which was seemingly too hard to ignore for investors this time around. Any time a company beats earnings expectations and sees its stock price decline in a similar fashion to Canadian Tire over the past three months, any competent investor needs to ask why, and buy on the dip if no reasonable explanations exist.

My thesis with Canadian Tire is that the company is likely to outperform other bricks and mortar retailers in the medium to long-term due to the company’s unique product mix (hard to replicate in an e-commerce world), as well as key growth initiatives the company’s renewed management team has put in place (such as an improved private label program) which should further insulate Canadian Tire from many of the pressures other bricks and mortar retailers are experiencing in today’s innovation-fueled market.

Canadian Tire remains near the top of my list in terms of traditional bricks and mortar retailers which should not only survive, but thrive, in the years to come.

Invest wisely, my friends.