Intrinsic value of Canadian Tire Corporation Limited Class - CTC-A

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$152.73

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$152.73

 
Intrinsic value

$93.62

 
Up/down potential

-39%

 
Rating

sell

 
Value-price divergence* premium content

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CTC-A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.27
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  12,681
  13,645
  14,646
  15,687
  16,769
  17,893
  19,063
  20,279
  21,545
  22,864
  24,237
  25,669
  27,162
  28,719
  30,345
  32,043
  33,816
  35,670
  37,608
  39,635
  41,756
  43,976
  46,300
  48,734
  51,283
  53,953
  56,751
  59,684
  62,759
  65,982
  69,362
Variable operating expenses, $m
 
  12,427
  13,336
  14,280
  15,262
  16,282
  17,344
  18,448
  19,597
  20,793
  22,039
  23,294
  24,649
  26,062
  27,538
  29,078
  30,688
  32,370
  34,129
  35,969
  37,893
  39,908
  42,017
  44,225
  46,538
  48,962
  51,501
  54,163
  56,953
  59,878
  62,945
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  11,576
  12,427
  13,336
  14,280
  15,262
  16,282
  17,344
  18,448
  19,597
  20,793
  22,039
  23,294
  24,649
  26,062
  27,538
  29,078
  30,688
  32,370
  34,129
  35,969
  37,893
  39,908
  42,017
  44,225
  46,538
  48,962
  51,501
  54,163
  56,953
  59,878
  62,945
Operating income, $m
  1,105
  1,218
  1,310
  1,407
  1,507
  1,611
  1,719
  1,832
  1,949
  2,071
  2,198
  2,375
  2,513
  2,657
  2,807
  2,964
  3,128
  3,300
  3,479
  3,667
  3,863
  4,068
  4,283
  4,508
  4,744
  4,991
  5,250
  5,521
  5,806
  6,104
  6,417
EBITDA, $m
  1,562
  1,713
  1,838
  1,969
  2,105
  2,246
  2,393
  2,546
  2,704
  2,870
  3,042
  3,222
  3,409
  3,605
  3,809
  4,022
  4,245
  4,478
  4,721
  4,975
  5,242
  5,520
  5,812
  6,117
  6,437
  6,773
  7,124
  7,492
  7,878
  8,283
  8,707
Interest expense (income), $m
  114
  133
  158
  184
  211
  239
  269
  299
  331
  363
  398
  433
  471
  510
  550
  592
  636
  683
  731
  781
  834
  889
  947
  1,007
  1,070
  1,137
  1,206
  1,279
  1,355
  1,435
  1,519
Earnings before tax, $m
  1,011
  1,085
  1,152
  1,223
  1,296
  1,371
  1,450
  1,533
  1,618
  1,707
  1,800
  1,941
  2,042
  2,147
  2,257
  2,372
  2,492
  2,617
  2,748
  2,885
  3,029
  3,179
  3,336
  3,501
  3,674
  3,854
  4,044
  4,242
  4,451
  4,669
  4,898
Tax expense, $m
  263
  293
  311
  330
  350
  370
  392
  414
  437
  461
  486
  524
  551
  580
  609
  640
  673
  707
  742
  779
  818
  858
  901
  945
  992
  1,041
  1,092
  1,145
  1,202
  1,261
  1,322
Net income, $m
  669
  792
  841
  892
  946
  1,001
  1,059
  1,119
  1,181
  1,246
  1,314
  1,417
  1,491
  1,567
  1,648
  1,732
  1,819
  1,911
  2,006
  2,106
  2,211
  2,321
  2,436
  2,556
  2,682
  2,814
  2,952
  3,097
  3,249
  3,408
  3,575

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  936
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  15,303
  15,453
  16,587
  17,766
  18,991
  20,264
  21,588
  22,966
  24,400
  25,893
  27,449
  29,070
  30,761
  32,524
  34,366
  36,288
  38,297
  40,396
  42,591
  44,887
  47,289
  49,803
  52,435
  55,191
  58,078
  61,102
  64,271
  67,593
  71,075
  74,725
  78,553
Adjusted assets (=assets-cash), $m
  14,367
  15,453
  16,587
  17,766
  18,991
  20,264
  21,588
  22,966
  24,400
  25,893
  27,449
  29,070
  30,761
  32,524
  34,366
  36,288
  38,297
  40,396
  42,591
  44,887
  47,289
  49,803
  52,435
  55,191
  58,078
  61,102
  64,271
  67,593
  71,075
  74,725
  78,553
Revenue / Adjusted assets
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
Average production assets, $m
  4,861
  5,226
  5,610
  6,008
  6,422
  6,853
  7,301
  7,767
  8,252
  8,757
  9,283
  9,831
  10,403
  10,999
  11,622
  12,272
  12,952
  13,662
  14,404
  15,180
  15,993
  16,843
  17,733
  18,665
  19,641
  20,664
  21,736
  22,859
  24,037
  25,271
  26,566
Working capital, $m
  3,957
  4,926
  5,287
  5,663
  6,054
  6,459
  6,882
  7,321
  7,778
  8,254
  8,750
  9,266
  9,805
  10,368
  10,955
  11,567
  12,208
  12,877
  13,577
  14,308
  15,074
  15,875
  16,714
  17,593
  18,513
  19,477
  20,487
  21,546
  22,656
  23,820
  25,040
Total debt, $m
  4,743
  4,516
  5,260
  6,033
  6,837
  7,672
  8,541
  9,445
  10,385
  11,365
  12,385
  13,449
  14,558
  15,715
  16,923
  18,184
  19,502
  20,879
  22,319
  23,825
  25,401
  27,050
  28,776
  30,584
  32,478
  34,462
  36,541
  38,720
  41,004
  43,399
  45,910
Total liabilities, $m
  10,364
  10,137
  10,881
  11,654
  12,458
  13,293
  14,162
  15,066
  16,006
  16,986
  18,006
  19,070
  20,179
  21,336
  22,544
  23,805
  25,123
  26,500
  27,940
  29,446
  31,022
  32,671
  34,397
  36,205
  38,099
  40,083
  42,162
  44,341
  46,625
  49,020
  51,531
Total equity, $m
  4,939
  5,316
  5,706
  6,111
  6,533
  6,971
  7,426
  7,900
  8,394
  8,907
  9,442
  10,000
  10,582
  11,188
  11,822
  12,483
  13,174
  13,896
  14,651
  15,441
  16,267
  17,132
  18,038
  18,986
  19,979
  21,019
  22,109
  23,252
  24,450
  25,705
  27,022
Total liabilities and equity, $m
  15,303
  15,453
  16,587
  17,765
  18,991
  20,264
  21,588
  22,966
  24,400
  25,893
  27,448
  29,070
  30,761
  32,524
  34,366
  36,288
  38,297
  40,396
  42,591
  44,887
  47,289
  49,803
  52,435
  55,191
  58,078
  61,102
  64,271
  67,593
  71,075
  74,725
  78,553
Debt-to-equity ratio
  0.960
  0.850
  0.920
  0.990
  1.050
  1.100
  1.150
  1.200
  1.240
  1.280
  1.310
  1.340
  1.380
  1.400
  1.430
  1.460
  1.480
  1.500
  1.520
  1.540
  1.560
  1.580
  1.600
  1.610
  1.630
  1.640
  1.650
  1.670
  1.680
  1.690
  1.700
Adjusted equity ratio
  0.342
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  669
  792
  841
  892
  946
  1,001
  1,059
  1,119
  1,181
  1,246
  1,314
  1,417
  1,491
  1,567
  1,648
  1,732
  1,819
  1,911
  2,006
  2,106
  2,211
  2,321
  2,436
  2,556
  2,682
  2,814
  2,952
  3,097
  3,249
  3,408
  3,575
Depreciation, amort., depletion, $m
  457
  495
  528
  562
  598
  635
  674
  714
  756
  799
  845
  848
  897
  948
  1,002
  1,058
  1,117
  1,178
  1,242
  1,309
  1,379
  1,452
  1,529
  1,609
  1,693
  1,781
  1,874
  1,971
  2,072
  2,179
  2,290
Funds from operations, $m
  436
  1,287
  1,369
  1,455
  1,544
  1,636
  1,733
  1,833
  1,937
  2,046
  2,159
  2,265
  2,387
  2,516
  2,650
  2,789
  2,936
  3,088
  3,248
  3,415
  3,590
  3,773
  3,964
  4,165
  4,375
  4,595
  4,826
  5,068
  5,321
  5,587
  5,865
Change in working capital, $m
  -550
  348
  362
  376
  390
  406
  422
  439
  457
  476
  496
  517
  539
  562
  587
  613
  640
  669
  700
  732
  766
  801
  839
  879
  920
  964
  1,010
  1,059
  1,110
  1,164
  1,220
Cash from operations, $m
  986
  1,011
  1,008
  1,079
  1,153
  1,231
  1,311
  1,394
  1,480
  1,570
  1,663
  1,748
  1,849
  1,953
  2,063
  2,177
  2,295
  2,419
  2,548
  2,683
  2,824
  2,971
  3,125
  3,286
  3,455
  3,631
  3,816
  4,009
  4,211
  4,423
  4,645
Maintenance CAPEX, $m
  0
  -419
  -451
  -484
  -518
  -554
  -591
  -629
  -670
  -711
  -755
  -800
  -848
  -897
  -948
  -1,002
  -1,058
  -1,117
  -1,178
  -1,242
  -1,309
  -1,379
  -1,452
  -1,529
  -1,609
  -1,693
  -1,781
  -1,874
  -1,971
  -2,072
  -2,179
New CAPEX, $m
  -781
  -365
  -384
  -399
  -414
  -431
  -448
  -466
  -485
  -505
  -526
  -548
  -572
  -597
  -623
  -650
  -679
  -710
  -742
  -776
  -812
  -850
  -890
  -932
  -976
  -1,023
  -1,072
  -1,123
  -1,178
  -1,235
  -1,295
Cash from investing activities, $m
  -783
  -784
  -835
  -883
  -932
  -985
  -1,039
  -1,095
  -1,155
  -1,216
  -1,281
  -1,348
  -1,420
  -1,494
  -1,571
  -1,652
  -1,737
  -1,827
  -1,920
  -2,018
  -2,121
  -2,229
  -2,342
  -2,461
  -2,585
  -2,716
  -2,853
  -2,997
  -3,149
  -3,307
  -3,474
Free cash flow, $m
  203
  227
  174
  197
  221
  246
  272
  298
  325
  353
  382
  399
  429
  460
  492
  524
  558
  593
  628
  665
  703
  743
  783
  826
  869
  915
  962
  1,012
  1,063
  1,117
  1,172
Issuance/(repayment) of debt, $m
  481
  709
  744
  773
  804
  835
  869
  904
  941
  979
  1,020
  1,064
  1,109
  1,157
  1,208
  1,261
  1,318
  1,377
  1,440
  1,506
  1,576
  1,649
  1,726
  1,808
  1,894
  1,984
  2,079
  2,179
  2,284
  2,395
  2,511
Issuance/(repurchase) of shares, $m
  -449
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -122
  709
  744
  773
  804
  835
  869
  904
  941
  979
  1,020
  1,064
  1,109
  1,157
  1,208
  1,261
  1,318
  1,377
  1,440
  1,506
  1,576
  1,649
  1,726
  1,808
  1,894
  1,984
  2,079
  2,179
  2,284
  2,395
  2,511
Total cash flow (excl. dividends), $m
  81
  936
  918
  970
  1,025
  1,082
  1,141
  1,202
  1,266
  1,333
  1,402
  1,463
  1,538
  1,617
  1,700
  1,786
  1,876
  1,970
  2,068
  2,171
  2,279
  2,392
  2,510
  2,634
  2,763
  2,899
  3,041
  3,191
  3,347
  3,511
  3,683
Retained Cash Flow (-), $m
  55
  -377
  -390
  -405
  -421
  -438
  -456
  -474
  -493
  -514
  -535
  -558
  -582
  -607
  -633
  -661
  -691
  -722
  -755
  -790
  -826
  -865
  -905
  -948
  -993
  -1,040
  -1,090
  -1,143
  -1,198
  -1,256
  -1,317
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  559
  528
  565
  603
  644
  685
  728
  773
  819
  867
  905
  957
  1,010
  1,066
  1,124
  1,185
  1,248
  1,313
  1,381
  1,453
  1,527
  1,604
  1,685
  1,770
  1,859
  1,951
  2,048
  2,149
  2,255
  2,367
Discount rate, %
 
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
 
  528
  469
  469
  465
  458
  446
  431
  413
  391
  366
  335
  308
  279
  249
  220
  192
  164
  139
  115
  94
  76
  59
  46
  35
  26
  18
  13
  9
  6
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Canadian Tire Corporation, Limited provides a range of products and services through a portfolio of retail banners in Canada. Its Retail segment operates general merchandise retail tire stores with approximately 150,000 stock keeping units in living, fixing, playing, automotive, and seasonal categories under the Canadian Tire banner; a chain of 91 automotive parts specialty stores under the PartSource banner; and as a retailer of gasoline with a network of 298 retail gas bars under the Petroleum banner. As of December 31, 2015, it operated 293 convenience stores and kiosks, 83 car washes, 5 vehicle lubrication facilities, and 81 propane stations under the Canadian Tire banner. This segment also operates sporting goods and active wear retail stores under the FGL Sports banner; and 380 specialty apparel retail stores under the Mark’s banner. The company’s CT REIT segment operates a real estate investment trust that owns, develops, and leases income producing commercial properties. As of December 31, 2015, its portfolio comprised 287 properties consisting of 282 retail properties, 2 distribution centers, a mixed-use commercial property, and 2 development properties with a gross leasable area of approximately 21.5 million square feet. Its Financial Services segment markets a range of Canadian Tire-branded credit cards, including the Canadian Tire Options MasterCard, Canadian Tire Options World MasterCard, Cash Advantage MasterCard, Gas Advantage MasterCard, and Sport Chek MasterCard; various insurance and identity theft products to Canadian Tire customers; and interest savings accounts and guaranteed investment certificates. This segment also reinsures the risk associated with creditor insurance and warranty coverages purchased by Canadian Tire credit card customers, as well as accident and dismemberment insurance. The company was founded in 1922 and is based in Toronto, Canada.

FINANCIAL RATIOS  of  Canadian Tire Corporation Limited Class (CTC-A)

Valuation Ratios
P/E Ratio 16.2
Price to Sales 0.9
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 11
Price to Free Cash Flow 52.7
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 27.8%
Cap. Spend. - 3 Yr. Gr. Rate 8.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 64.5%
Total Debt to Equity 96%
Interest Coverage 10
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity 13.5%
Return On Equity - 3 Yr. Avg. 13%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 34.6%
Gross Margin - 3 Yr. Avg. 33.6%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 8.7%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 7.7%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate 26%
Eff/ Tax Rate - 3 Yr. Avg. 26.6%
Payout Ratio 23.6%

CTC-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTC-A stock intrinsic value calculation we used $12681 million for the last fiscal year's total revenue generated by Canadian Tire Corporation Limited Class . The default revenue input number comes from 2016 income statement of Canadian Tire Corporation Limited Class . You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CTC-A stock valuation model: a) initial revenue growth rate of 7.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.8%, whose default value for CTC-A is calculated based on our internal credit rating of Canadian Tire Corporation Limited Class , is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Canadian Tire Corporation Limited Class .
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CTC-A stock the variable cost ratio is equal to 91.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CTC-A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Canadian Tire Corporation Limited Class .

Corporate tax rate of 27% is the nominal tax rate for Canadian Tire Corporation Limited Class . In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CTC-A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CTC-A are equal to 38.3%.

Life of production assets of 11.6 years is the average useful life of capital assets used in Canadian Tire Corporation Limited Class operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CTC-A is equal to 36.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4939 million for Canadian Tire Corporation Limited Class - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 72.943 million for Canadian Tire Corporation Limited Class is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Canadian Tire Corporation Limited Class at the current share price and the inputted number of shares is $11.1 billion.


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Stock chart of CTC-A Financial statements of CTC-A
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The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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