Investment Research report

Canadian Tire Corporation, Ltd.

TSE:
CTC/CTC.A
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Canadian Tire Corporation, Ltd.
Kicking the Tire Down The Road
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Research Overview

INDEX:
S&P 500
Sector:
Consumer Discretionary
Position:
Short
Date:
Dec 5, 2019

After conducting a forensic financial and accounting review, Spruce Point believes Canadian Tire Corp, Ltd. (TSE: CTC/CTC.A), one of the largest retailers in Canada, will begin to under-perform optimistic expectations and the combination of these factors should result in a valuation at a significant discount to the market and its peers. Based on our investigation, we estimate 35% to 50% downside risk, or C$77 - C$100 per share.

The report highlights several key concerns with the company, including:

  • We believe that there is a risk of credit downgrade due to the Company’s overleveraged balance sheet
  • We find evidence of risky credit card business with rapidly deteriorating credit portfolio
  • The Company’s history of aggressive accounting practices masking poor earnings growth
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