Tractor Supply has been treading water for the past six months, recording a small return of 1.2% while holding steady at $54.78. The stock also fell short of the S&P 500’s 7% gain during that period.
Is now the time to buy TSCO? Find out in our full research report, it’s free.
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ:TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Tractor Supply operated 2,502 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 5.3% annual growth, much faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Tractor Supply’s five-year average ROIC was 35.1%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Tractor Supply’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.
Tractor Supply has huge potential even though it has some open questions. With its shares underperforming the market lately, the stock trades at 25× forward price-to-earnings (or $54.78 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run – and we’re laser-focused on finding the best stocks for this upcoming cycle.
