Tractor Supply Company (NASDAQ:TSCO) has established itself as a leader in the rural retail marketplace, catering to the specific needs of farmers, horse trainers, mechanics, and other rural customers. Unlike its broader competitors such as Amazon (AMZN) and Home Depot (HD), Tractor Supply Company has adopted a focused strategy that has allowed it to outperform in its niche.
While Tractor Supply Company faces challenges from competitors and potential disruptions caused by inflation and climate change, the company has maintained its growth and profitability through effective cost-cutting measures and a strong brand presence in its target market.
Snapshot of the Company
A quick overview of Tractor Supply Company’s performance can be obtained through the BTMA Stock Analyzer’s company rating score, which rates the company at 87 out of 100. This high rating indicates the company’s overall strong performance.
Tractor Supply Company has consistently experienced year-over-year stock price growth, with an average growth rate of 14.12% over the past 10 years. Earnings have also seen steady increases, driving higher EPS and contributing to the company’s overall profitability. The company’s return on equity (ROE) has reached an impressive 43.84%, exceeding industry peers, while return on invested capital (ROIC) stands at 19.69%, indicating the company’s effective use of invested capital. Additionally, the company has maintained a consistent gross margin percentage of 34.83% over the past five years, demonstrating its ability to manage costs and maintain profitability.
Tractor Supply Company currently carries a higher debt-to-equity ratio, indicating a higher risk level in terms of debt management. However, the company’s current ratio of 1.32 suggests it has the ability to meet its short-term debt obligations. While the company’s financial health is mixed, it pays regular dividends, demonstrating a commitment to shareholder returns.
Value vs. Price
The Price-Earnings Ratio (P/E Ratio) of Tractor Supply Company currently stands at 24.57, indicating a potentially overpriced stock compared to the long-term market average P/E Ratio of 15. However, considering the company’s historical averages and growth forecasts, Tractor Supply Company may be trading at a fair price. The estimated value of the stock is $180.32, while the current stock price is $206.01, suggesting the stock is selling above its value. Nevertheless, there are varying scenarios that could impact the stock’s valuation.
Analyzing the Fundamentals
Tractor Supply Company exhibits solid long-term fundamentals, with consistent sales growth and profitability despite potential challenges. The company’s solid performance and understanding of its target market have positioned it as a leader in the industry. While the company’s debt levels and competition pose risks, Tractor Supply Company’s growth potential remains intact.
Tractor Supply Company vs. the S&P 500
Over the past 10 years, Tractor Supply Company has seen returns that were on par with or slightly below the general market represented by the S&P 500. However, the company’s returns have outperformed the market since the onset of the COVID-19 pandemic. While the tech sector decline has affected overall market returns, Tractor Supply Company has benefited from increased sales in rural areas. It is uncertain whether this shift will continue in the long term.
Analysts anticipate Tractor Supply Company’s earnings to grow at an average annual rate of 7.73% over the next five years. The average one-year price target for the stock is $246.46, suggesting a potential 19.6% increase in value. The Expected Annual Compounding Rate of Return is estimated to be 11.58%. Based on past results, annual returns ranging from 12% to 20% can be expected.
Summary of the Fundamentals
Tractor Supply Company demonstrates strong long-term fundamentals, with consistent sales growth, profitability, and an expanding store network. Despite potential challenges, the company remains well-positioned for future growth. However, current debt levels and the stock’s valuation must be considered. Tractor Supply Company passes most of the checklist criteria, scoring 7 out of 10. The company’s fundamental strengths make it a viable consideration for any portfolio.
Is Tractor Supply Company Currently a Bargain?
While Tractor Supply Company has experienced significant growth, the company’s Price-Earnings Ratio (P/E Ratio) and estimated value suggest that it may be overpriced compared to its intrinsic value. Investors may want to wait for the stock price to fall to around $180 for a more favorable entry point.