Tractor Supply Co (TSCO, Financial) recently posted a daily gain of 3.42%, reflecting a robust three-month gain of 21.54%. With an Earnings Per Share (EPS) of 10.27, the question arises: is the stock modestly overvalued? This article delves into the valuation analysis of Tractor Supply Co, guiding investors through its financial landscape and intrinsic value as estimated by the GF Value. Keep reading to uncover whether Tractor Supply Co stands as a prudent investment.
Company Overview
Tractor Supply Co, the largest operator of retail farm and ranch stores in the United States, primarily serves recreational farmers and ranchers, with minimal exposure to commercial and industrial farm operations. As of the latest fiscal year, the company operates 2,233 stores across 49 states, including rebranded Orscheln Farm and Home stores and Petsense by Tractor Supply stores. With a focus on rural communities, Tractor Supply Co generated a revenue breakdown in fiscal 2023 primarily from livestock, equine & agriculture (27%), companion animal (25%), and seasonal & recreation (22%).
Understanding the GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This valuation suggests that Tractor Supply Co's current stock price of $285.67, with a market cap of $30.80 billion, is modestly overvalued. The GF Value of $247.34 indicates a potential overestimation in market price, suggesting that the stock might see limited future returns compared to its business growth.
Financial Strength and Risks
Assessing a company's financial strength is crucial to understanding its risk of capital loss. Tractor Supply Co's cash-to-debt ratio of 0.05 ranks lower than 89.87% of peers in the Retail - Cyclical industry, indicating potential financial risk. However, its overall financial strength rating of 6 out of 10 suggests a fair stability.
Profitability and Growth Prospects
Tractor Supply Co has maintained profitability over the past decade, with a robust operating margin of 10.22%, ranking better than 79.73% of its industry peers. The company's consistent revenue growth, with a three-year average annual revenue growth rate of 13.6%, underscores its capacity to generate value for shareholders. Additionally, the comparison between its Return on Invested Capital (ROIC) of 16.85 and Weighted Average Cost of Capital (WACC) of 7.61 highlights effective capital management that exceeds its costs.
Conclusion
In conclusion, while Tractor Supply Co (TSCO, Financial) is estimated to be modestly overvalued, its financial health is stable, and its profitability is robust. For investors considering this stock, it is advisable to weigh the current overvaluation against the company's strong performance metrics. For further details on Tractor Supply Co's financial health and stock performance, explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
