Tractor Supply Co (TSCO, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $213.18, Tractor Supply Co has witnessed a decline of 0.85% over a period, marked against a three-month change of -1.94%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Tractor Supply Co is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Tractor Supply Co's GF Score components are as follows:
- 1. Financial strength rank: 6/10
- 2. Profitability rank: 10/10
- 3. Growth rank: 10/10
- 4. GF Value rank: 6/10
- 5. Momentum rank: 7/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high profitability and growth rank, and a slightly lower financial strength rank, GuruFocus assigned Tractor Supply Co the GF Score of 96 out of 100, which signals the highest outperformance potential.
Understanding Tractor Supply Co's Business
Tractor Supply Co, with a market cap of $23.2 billion and sales of $14.76 billion, is the largest operator of retail farm and ranch stores in the United States. The company targets recreational farmers and ranchers and has little exposure to commercial and industrial farm operations. Currently, the company operates 2,181 of its namesake banners in 49 states, along with 192 Petsense by Tractor Supply stores and 81 Orscheln Farm and Home stores. Stores are generally concentrated in rural communities, as opposed to urban and suburban areas. In fiscal 2022, revenue consisted primarily of livestock and pet (50%), hardware, tools, and truck (19%), and seasonal gift and toy (21%).
Financial Strength Breakdown
According to the Financial Strength rating, Tractor Supply Co's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure.
The Interest Coverage ratio for Tractor Supply Co stands impressively at 35.42, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 5.3, Tractor Supply Co exhibits a strong defense against financial distress, highlighting its robust financial stability.
With a favorable Debt-to-Revenue ratio of 0.33, Tractor Supply Co's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Tractor Supply Co's impressive standing among its peers in generating profit.
Tractor Supply Co Operating Margin has increased (13.88%) over the past five years, as shown by the following data: 2018: 8.87; 2019: 8.90; 2020: 10.04; 2021: 10.26; 2022: 10.10; .
Furthermore, Tractor Supply Co's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 34.16; 2019: 34.38; 2020: 35.42; 2021: 35.17; 2022: 35; . This trend underscores the company's growing proficiency in transforming revenue into profit.
The Piotroski F-Score confirms Tractor Supply Co's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency.
Tractor Supply Co's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Tractor Supply Co demonstrates a strong commitment to expanding its business.
The company's 3-Year Revenue Growth Rate is 22.3%, which outperforms better than 83.99% of 1043 companies in the Retail - Cyclical industry
Moreover, Tractor Supply Co has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 26.8, and the rate over the past five years is 20.7. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Tractor Supply Co's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health, consistent profitability, and impressive growth trajectory, making it a compelling investment opportunity for value investors.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
