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 $254.64, Tractor Supply Co has witnessed a daily gain of 0.73%, marked against a three-month change of 10%. A thorough analysis, underlined by the GF Score, suggests that Tractor Supply Co is well-positioned for substantial growth in the near future.
What Is 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.
- Financial strength rank: 6/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 5/10
- Momentum rank: 10/10
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 high ranks in profitability, growth, and momentum, and a slightly lower rank in financial strength and GF Value, GuruFocus assigned Tractor Supply Co the GF Score of 96 out of 100, which signals the highest outperformance potential.
Understanding Tractor Supply Co Business
Tractor Supply Co is the largest operator of retail farm and ranch stores in the United States, targeting recreational farmers and ranchers with minimal exposure to commercial and industrial farm operations. With a market cap of $27.48 billion and sales of $14.56 billion, the company operates 2,216 Tractor Supply stores across 49 states, including 81 Orscheln Farm and Home stores (rebranded as Tractor Supply), and 198 Petsense by Tractor Supply stores. Tractor Supply Co's stores are predominantly located in rural communities, and in fiscal 2022, revenue was primarily derived from 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 31.8, 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 5.54, Tractor Supply Co exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.35, 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's Operating Margin has increased over the past five years, with the current margin at 10.16%. Furthermore, the company's Gross Margin has seen a consistent rise over the past five years, reaching 35.92% in 2023. This trend underscores the company's growing proficiency in transforming revenue into profit. Tractor Supply Co's strong Predictability Rank of 4.0 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 13.6%, which outperforms better than 71.66% of 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 18.2, and the rate over the past five years is 21.4. This trend accentuates the company's continued capability to drive growth.
Next Steps
Considering Tractor Supply Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. With a GF Score of 96, Tractor Supply Co stands out as a compelling investment opportunity for those seeking companies with strong market momentum and a proven track record of growth. Investors looking to capitalize on such high-performing stocks can explore more options with the GF Score Screen available to GuruFocus Premium members.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
