The Investment Reporter, a Canadian newsletter with a tremendous long-term record, has a buy rating on Tim Hortons (TSX: THI, NYSE: THI) in its April 7, 2006 issue.
We believe it’s worth paying up to $34 a share for Tim, Canada’s largest chain of quick service restaurants, either in the market or through Wendy’s International.
The newsletter arrives at the fair value of Tim based on both its price-to-earnings and price-to-book value ratios and believes that the donut chain should deliver long-term gains and growing dividends. THI closed at $30.35 on the TSX on Friday.
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5 responses so far ↓
1 Big Cajun Man // Apr 26, 2006 at 8:35 am
Really? I don’t know what the model is for their revenue, so I am not sure I understand whether they are a BUY or not. Will Timmy’s prosper due to more stores opening, or by the value of their brand and product? Can someone tell me?
–C8j
2 Canadian Capitalist // Apr 26, 2006 at 10:16 am
The Investment Reporter thinks Tim has quite a bit of room to grow in Canada. Tim is already a very profitable franchise and is a very good business. The key question in my opinion is how much to pay for the business. My personal opinion is I would buy THI between $22-23, but then the Reporter has a tremendous record and I don’t!
3 ratingo.com // Apr 27, 2006 at 11:30 pm
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4 Michael Urlocker // May 22, 2006 at 7:50 am
I agree that Tim’s is a well-run, dominant company in Canada. Even a cash-generating machine. But if you read the prospectus, there is evidence that growth in Canada is slowing and the US market hasnt been so wonderful to Tim’s so far.
I wonder if Tim’s would do better in the USA if the company tried a disruptive approach.
Thats the way tech companies operate when they are trying to crack new markets. Think of I-pod and Blackberry, for example, two devices that were very different (and in fact incompatible with) the mainstream when they came out. Now they are mainstream.
I welcome your thoughts on the analysis I wrote up at http://www.OnDisruption.com
Here is the specific Tim’s posting:
http://ondisruption.typepad.com/my_weblog/2006/03/donuts_and_blac.html
Likewise, Laura Ries (marketing & brand guru from Ries & Ries fame) makes similar comments about Dunkin’ Donuts and its lack of differentiation (All the major coffee competitors have used the “same but cheaper strategy” which never works against the “real thing,”) at her blog:
http://ries.typepad.com/ries_blog/2006/04/why_dunkin_donu.html
Your thoughts?
5 Canadian Capitalist // May 22, 2006 at 8:23 pm
Michael: I am a bit skeptical about Tim’s growth prospects in the US. As I discussed in a couple of earlier posts, at $30 THI is priced to deliver good growth many years into the future. As an investor, I am not willing to bet that such growth would materialize. I was surprised that a conservative stock picker like The Investment Reporter recommended THI.
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