Strong Growth Makes Tim’s a Buy

Article Excerpt

TIM HORTONS INC. $35 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; SI Rating: Extra risk) operates 2,600 stores in Canada that sell coffee, donuts and other foods. The company also has roughly 300 outlets in the United States. Franchisees operate 96.5% of its stores. The company was a wholly owned subsidiary of Wendy’s International Inc. until March 2006. That’s when it completed an initial public offering of common shares at $27.00 each. In September 2006, Wendy’s handed out its remaining 82.75% stake in Tim Hortons to its own shareholders as a taxdeferred special dividend. Tim Hortons’ revenue grew from $926.1 million in 2001 to $1.5 billion in 2005, or 12.8% compounded annually. Profits grew from $0.83 a share (total $132.2 million) in 2001 to $1.28 a share ($205.1 million) in 2004. A $53.1 million pre-tax writedown of goodwill cut profit in 2005 to $1.19 a share ($191.1 million). Biggest fast-food chain in Canada The company recently supplanted McDonald’s as Canada’s largest fast-food chain,…

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