Thursday, May 30, 2013

Tim Hortons (THI) 2013 Review

Tim Hortons Inc operates, develops and franchises quick service restaurants in Canada (3148) and the US (602).  The company has grown profits at a 12% annual rate. Since 2005 with dividends per share increasing from $.12 to $1.04.  In the same timeframe it has generated a 25%+ return on equity.  Above average growth should continue as a result of:

(1)    geographic expansion,

(2)    increased marketing effort to raise the size of the average customer check size,

(3)        new product introductions,

(4)        increasing same store sales,

(5)        higher prices,

(6)        share buyback.

Negatives:

(1)    it is a highly competitive industry.  Its major competitor is Starbucks.

(2)    rising commodity prices,

(3)    the potential impact of continued economic malaise on sales.

            THI is rated A by Value Line, has a 30% debt to equity ratio and its stock yields 2.1%.

  Statistical Summary

                  Stock      Dividend         Payout      # Increases  
                  Yield      Growth Rate     Ratio       Since 2005

THI           2.1%           17%              30%             6
Ind Ave      2.6              10*               44               NA 

                Debt/                        EPS Down       Net        Value Line
                Equity         ROE      Since 2005      Margin       Rating

THI          30%            32%           1                 14%           A
Ind Ave     43               23             NA               9             NA

*most companies in THI industry do not pay a dividend

     Chart

            Note: THI stock made great initial progress off its November 2008 low, quickly surpassing the downtrend off its December 2007 high (red line) and the September 2008 trading high (green line).  Long term, the stock is in a trading range (straight blue lines).  Intermediate term, it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The Aggressive Growth Portfolio does not own THI.  The upper boundary of its Buy Value Range is $49; the lower boundary of its Sell Half Range is $64.

 



5/13

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