Newspaper article Sarasota Herald Tribune

Tractor Supply Looks Poised for Good Long-Term Growth

Newspaper article Sarasota Herald Tribune

Tractor Supply Looks Poised for Good Long-Term Growth

Article excerpt

If you are glancing up to see if the sky is falling as a result of listening to the soothsayers of doom, consider that a funny thing happens on the way to Wall Street ... stocks over time outperform other investments.

As I have explained repeatedly, the key reason for share price performance is that businesses retain earnings, which they reinvest to generate additional earnings and dividends. Driving it all is the basic theory of compounding. This was pointed out as far back as 1924 with the publication of a slim little book titled "Common Stock as Long Term Investments," by Edgar Lawrence Smith.

Legendary economist John Maynard Keynes, in reviewing the book, was quick to delineate that most important point.

Yet it is no secret that the investment playing field is not always level, as the Street has always been driven by greed and a liberal interpretation of what denotes fair play. But you should never view the Street's antics as an impediment.

For example, you might want to research Tractor Supply (TSCO), the largest operator of farm-and-ranch stores. This retail giant has a unique market niche in that it serves the lifestyle needs of recreational farmers and ranchers. TSCO recently revamped itself by concentrating on square footage growth and maximizing productivity from its existing store base.

At the same time, the company significantly changed its store operations to make them simpler and more customer-friendly. Those initiatives will likely increase store traffic and subsequent sales.

When I last wrote about TSCO a year ago, my earnings estimate was $2.25 per share, with a 12- month projected share price of $59. So how did the company do? Earnings for 2013 came in at $2.32, while the shares recently traded at $74.01. All references to per share amounts reflect a two-for-one stock split on Sept. 26, 2013.

The company in fiscal 2013 increased sales 10.7 percent, while comparable store sales increased 4.8 percent compared with fiscal 2012. Gross profit was up 12.0 percent, while gross margin increased to 34.0 percent of sales, up from 33.6 percent of sales in fiscal 2012. …

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