Tractor Supply Company (TSCO)

(22 September 2016)

  • Last Traded Price: $68.34
  • 52-week High: $97.25
  • 52-week Low: $66.77
  • P/E: 21.72
  • Return on Equity: 30.30%
  • Dividend Yield: 0.89%
  • Debt to Capital Ratio: 10.7%
  • Current Ratio: 2.19:1


Balance Sheet & Cash Flow Overview

($ in Thousands)

(Dates for Fiscal 6 Months Ended June 27 ’15 – June 25 ‘16)

  • Total Assets increased $307,496.
  • Currents Liabilities decreased $21,166.
  • Net Sales increased $216,079.
  • Gross Profit increased $73,741.
  • Operating Income increased $19,432.
  • Net Income rose $12,722.
  • Net Cash from Operating Activities increased $34,501.
  • Used $4,203 more in ’16 for Investing Activities.
  • Cash and Cash Equivalents at End of Period increased $94,795.
  • Livestock and Pet made up 46% of Retail Sales, up 2% from ’15.
    • Seasonal, Gift and Toy Products – 20%
    • Hardware, Tools and Truck – 5%
    • Clothing and Footwear – 7%
  • TSCO Opened 22 stores for Fiscal Three Months ended June 25 ’16 compared to 17 openings June 27 ’15.
    • In total, Store Count increased by 104 at end of period.
  • Working Capital increased $198.2.

Company Notes

  • Largest consumer farm specialty retailer in the U.S., giving it ample advantage within its competitive market, with more than $6 Billion in annual sales.
  • Store base has grown by 50% over the past 5 years.
  • Forecast that TSCO will grow to nearly 2,400 stores over the next decade, starting with big box centers in the western half of US.
  • Biggest competitors are PetSmart and Home Depot.
    • That being said, TSCO focuses on active, DIY consumers, in which many of those products are higher-end, higher cost.
  • Currently working on customer attribution data (loyalty program).
  • Energy markets and the slowing agriculture industry are main causes for stock decline.
  • After opening Arizona distribution center in 2015, TSCO should be able to leverage their distribution expenses, which in turn leads to accelerated EBIT expansion.
  • Fell from Sept. 7th high of $83.53 down to $67.58 on 9/20.
    • This is due to Comp Sales woes and sell-side downgrades as their guidance disappoints.
    • However, TSCO faces ‘Near-Term Questions’
  • As a long – term, value play, TSCO would be considered a “steal” at these levels.
  • Applying Discounted Cash Flow models, TSCO Fair Value is around $88.82.
  • Negative Near – Term outlooks could be a chance at long term value and profit.

Opinion on Where it’s Headed

  • I am bullish on TSCO. Short term downtrends and growth sales present a great company at a really good price. Using a discounted cash flow model, TSCO has an intrinsic value of $89. Given it’s impressive balance sheets, sustainable cash flows, and position within it’s industry, I am bullish on the trend of this company.

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