Tractor Supply Company focuses on supplying the lifestyle needs of recreational farmers, tradesmen and small businesses. The company offers a portfolio of products, which include equine, livestock, pet and small animal products, hardware, truck, towing and tool products, seasonal products, including lawn and garden items, power equipment, gifts and toys, work/recreational clothing and footwear, and maintenance products for agricultural and rural use. The company was founded in 1938 and is based in Brentwood, Tennessee.
TSCO Price Forecast Based on DCF Valuation
DCF Fair Value Target:
Below please find a table outlining a discounted cash flow forecast for TSCO, in which we model out valuation assuming a variety of terminal growth rates. To summarize, we found that Tractor Supply Co ranked in the 67th percentile in terms of potential gain offered. More precisely, our analysis suggests the stock is undervalued by approximately 162.5% on a DCF basis. The most interesting components of our discounted cash flow analysis for Tractor Supply Co ended up being:
TSCO's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than 25.09% of tickers in our DCF set.
Tractor Supply Co's interest coverage rate -- a measure of gross earnings relative to interest payments -- comes in at 39.29. This coverage rate is greater than that of 92.51% of stocks we're observing for the purpose of forecasting via discounted cash flows.
Relative to other stocks in its sector (Consumer Cyclical), Tractor Supply Co has a reliance on debt greater than only 17.97% of them.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
Want more companies with a valuation profile/forecast similar to that of Tractor Supply Co? See ICON, SBH, QNST, ELA, and CRTO.
Having added Tractor Supply Company (TSCO) to the Dividends 500 portfolio at the start of the year, we will examine what continues to make the company a great long term buy, despite its 60% increase in price so far in 2020. Attributable to the growth rates/metrics that make it a...
Smart Dividends on Seeking Alpha | September 4, 2020