Trade Idea – Tractor Supply Company

As we all know from Ocean’s trilogy, playing a story once again is probably not the best. In case of Tractor Supply Co. this feeling has been underlined by different segment and company specific factors as well:

  • The outlook of the classic US retail players have been weakened mainly due to the increasing dominance of e-commerce business models. Year-to-date number on retail store closures is already outpacing that of 2008 (year of latest recession in the States) and appr. 2,880 have been announced so far this year according to Credit Suisse.
  • TSCO’s share price dropped significantly and its valuation (and its expected dividend yield) is far more expensive compared to its peers.

 

IMG_0144

Historical share price performance of Tractor Supply Company, source: Yahoo Finance

 

On the other hand the low-debt company could offer some locked in potential. Based on the analysts’ consensus the long-term growth prospects remain roboust despite the disappointing quarterly performance and the 12m projected share price might offer more than 20% return.

Considering all these pros and cons a new long position in TSCO has been opened at USD 53 on 24 May 2017.

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