Preliminary Summative Assignment 1: Equity Valuation of Canadian Tire

This assignment is an equity valuation report focusing on Canadian Tire Corporation (CTC). It begins with an executive summary providing a company overview, including its founding, business operations (selling automotive, hardware, sports, and home products through 1686 locations and subsidiaries), market capitalization, and financial highlights. The report then analyzes revenue, including its growth from 2016-2018, revenue breakdown by retail banners, and segment-wise revenue distribution. An environmental analysis includes key economic indicators like GDP growth, unemployment, inflation, and interest rates, as well as a Porter's Five Forces analysis and SWOT analysis to assess market dynamics and competitive positioning. Revenue projections for the next two years are developed based on historical trends, and analyst growth expectations are included. The report references financial statements and reports from sources like Yahoo Finance and Canadian Tire's investor relations to support the analysis. The assignment aims to provide a comprehensive understanding of CTC's financial performance and future prospects.

Equity
Valuation
Preliminary Summative Assignment 1

Executive Summary
• 4.24% (Projected growth during the next
2 years)
SALES GROWTH:
• CAD 144.92 (January 24th Closing)CURRENT STOCK PRICE:
• Toronto Stock Exchange (TICKER: CTC)STOCK EXCHANGE:
• DECEMBER 31stFISCAL YEAR END:
• CAD
CURRENCY OF
FINANCIAL
STATEMENTS:

Firm
Description

COMPANY OVERVIEW
4
• One of the Largest Tyre Company in Canada
• Founded in the year 1922
• Headquartered in Toronto, Ontario, Canada
• Currency in CAD
• Fiscal year end of December 31st
• Listed on the Toronto Stock Market under the ticker symbol
CTC (Yahoo Finance, 2019).
• Market Cap of $9.05 Billion
• Founders Alfred J. Billes and J. William Billes
Business Highlights Operations
• Primary Business Activity: Selling a range of automotive,
hardware, sports and leisure, and home products.
• The company has in total of 1686 locations.
• The company in total has a 58,000 employee base.
• Subsidiaries of CTC Company are as follows:
 FGL Sports
 Part Source
 Canadian Tire Bank
 Mark's
 Canadian Tire Petroleum
 Helly Hansen
 Party CityCore Business Model
Cross Selling
• Core revenue from the sale of
its Canadian Tire.
• Better quality product and an
increasing consumer base
has able the company
increase revenue base.
Customer Loyalty
• Strong customer loyalty
program rewarding
customers for spending done.
• Loyalty customer rewards are
issued as a part of sales
transaction done.
Direct Selling
• Engages in selling a large
portion of its tickets directly
to consumers through its
retail outlet and online
shopping.
Value for Goods
• Customized shopping
experience and easy
convenience via online
selling.
• Canadian Tire Company. uses the following 4 strategies to transform its activities into value/cash:
Sources: American Airlines Group Inc. 2018 Annual Report, Investor Relations. (2019). Retrieved September 26, 2019, from https://americanairlines.gcs-web.com/investor-relations.,
American Airlines Business Model: Business Model Navigator. (2017). Retrieved September 25, 2019, from https://businessmodelnavigator.com/case-firm?id=9.

Revenue Analysis
 The key customers of the CTC Company
are retail as well as business consumers.
 The revenue of the company is generally
driven by its 6 retails banners.
 From the year 2016 to 2018, the
company’s revenue has shown a CAGR
growth rate of about 5.9% (Canadian Tire
Corporation, Limited - Investors - Financial
Reporting - Annual Disclosures 2018).
 The Canadian Tire accounts for generating
the highest revenue base.

Revenue Breakdown
 The retail revenue for the company
has increased at a higher rate where
the store count has increased
consistently for the company for the
past three years.
 The graphical analysis presented
well shows the increase in the
revenue base with the increase in
the stores of the company.

Revenue Analysis via Segment
 The revenue marked from the
Canadian Tire sector has been the
highest to around 56%.
 The distribution of revenue from the
various subsidiary will be helping in
better revenue base.
56%
16%
12%
4%
12%
Revenue Breakdown (%)
Canadian Tire
SportCheck
Mark's
Helly Hansen
Petroleum
Revenue Breakdown
Segments Amount ($) Percentage (%)
Canadian Tire 2121.7 56%
SportCheck 602.5 16%
Mark's 469.0 12%
Helly Hansen 139.0 4%
Petroleum 468.6 12%
Total 3800.8 100%

Performance and Revenue
Analysis Breakdown

Environmen
tal Analysis

Economic Analysis
Key Global and Macro-Economic Indicators
The revenue of the company is highly influenced by the key economic factors like
GDP Growth Rate, Unemployment status, Inflation and interest rate.
 The Canadian GDP Growth is expected to grow from on a slow basis and this
would be primarily driven by the weak labor market and higher unemployment
rate.
 The inflation is expected to rise and this would be primarily driven by increasing
price of raw materials and other goods used.
 The interest rate is expected to well increase at a increasing rate and this will be
affecting the total or net finance cost of the company.

Economic Analysis
GDP Growth Rate of Canada

Competition Analysis
Porters Five Forces
Threat of New Entry: Low: The retail market is primarily at a mature stage and
requires high capital outlay so entry in this market is quite challenging.
Power of Suppliers: Low: The number of suppliers selling the goods are in high
numbers that offers similar or substitute product.
Power of Buyers: High: High competition in the industry allows the retail
consumers to get a high bargaining power.
Threat of Substitution: High: The offered products by the company are very
similar to other products that are sold by other companies available in the market.
Competitive Rivalry: High: The competitive rivalry associated with the company
is comparatively high due to the wide scale expansion of various offered products.

Competition Analysis

SWOT Analysis
Strength:
Strong global supply chain of
networks.
Strong National Reach and Scale
Well Positioned in the
Competitive Market.
Weakness:
Limited Operations in the
company with a limited scale of
expansion.
Increase in Price
Lower Customer Services.
Opportunities:
Technological Innovations and
innovations expected from the
retail side.
Increasing Overseas Demand in
the global market.
Threats:
Small and Growing population in
Canada.
Increase in competition from
new entrants are the key
threats.

Projected Revenue Growth (%)
 The revenue has been well projected for the company by looking at the
past trend of the company for the last five years and the same has
been well applied in order to take the average revenue growth rate
observed.
 The average revenue growth rate determined has been well applied for
finding out the projected revenue for the next two years.
 The average growth rate that has been determined for the company
for the past five years has been around 4.24% (St, 2019).

Revenue Analysis
Revenue Growth Analysis
Particulars 2013 2014 2015 2016 2017 2018 Average (%) 2019 2020
Revenue 11427200 11785600 12462900 12681000 13434900 14058700 14655392 15277410
YOY Growth (%) 3.14% 5.75% 1.75% 5.95% 4.64% 4.24%

Analyst Growth Expectations
The growth expectation shown by analysts has been well shown below which well
shows that the revenue is expected to increase for the given the past trends that has
been seen in the company for the time period analyzed. Growth in the industrial and
business factors supported by positive macro-economic factors are some of the key
growth expectations.

Reference
 St, S. (2019). Will Canadian Tire Corporation, Limited’s (TSE:CTC.A) Earnings Grow In The Next 12 Months?. Simply Wall St.
Retrieved 25 January 2020, from https://simplywall.st/stocks/ca/retail/tsx-ctc.a/canadian-tire-shares/news/will-canadian-
tire-corporation-limiteds-tsectc-a-earnings-grow-in-the-next-12-months/
 St, S. (2018). What Do Expectations Tell Us About Canadian Tire Corporation Limited’s (TSE:CTC.A) Margins In The Next
Few Years?. Simply Wall St. Retrieved 25 January 2020, from https://simplywall.st/stocks/ca/retail/tsx-ctc.a/canadian-tire-
shares/news/what-do-expectations-tell-us-about-canadian-tire-corporation-limiteds-tsectc-a-margins-in-the-next-few-years/
 Canadian Tire Corporation, Limited - Investors - Financial Reporting - Annual Disclosures . (2018). Corp.canadiantire.ca.
Retrieved 25 January 2020, from https://corp.canadiantire.ca/English/investors/financials-reporting/annual-disclosures/
default.aspx
 Yahoo is now a part of Verizon Media. (2020). Ca.finance.yahoo.com. Retrieved 25 January 2020, from
https://ca.finance.yahoo.com/quote/CTC-A.TO/financials?p=CTC-A.TO
 Annual Report, (2020). S22.q4cdn.com. Retrieved 25 January 2020, from
https://s22.q4cdn.com/405442328/files/doc_financials/en/2018/q4/CTC-2018-Annual-Report_Online_EN.PDF
 ZoomInfo. (2020). CANADIAN TIRE - Overview, News & Competitors | ZoomInfo.com. [online] Available at:
https://www.zoominfo.com/c/Canadian-tire/20221448 [Accessed 25 Jan. 2020].

THANK YOU