RON.TO  Rona Inc

Exchange

TSX

Sector

Diversified Industries

Industry

Market Cap.

2.57B

Vuru Grade

21.31/100

Current Price

$23.99
+0.01 (+0.04%)

Growth Price

$14.58
Overvalued by 39.23%

Company Metrics

  • P/E 47.98
  • P/S 0.6
  • P/B 1.88
  • EPS 0.5
  • Cash ROIC 2.42%
  • Cash Ratio 0.00
  • Dividend 0 / 0%
  • Avg. Vol. 5,070.00
  • Shares 107.13M
  • Market Cap. 2.57B

Company Description

RONA inc. engages in the distribution and retail of hardware, home improvement, and gardening products in Canada. The company offers automotive products, building materials and accessories, construction plans, decoration products, eco-responsible products, gift cards, hand tools, hardware products, horticulture products, kitchen and bathroom products, lighting and electricity products, paint produ... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Rona Inc tops estimates in potentially last report as Canadian-controlled retailer
Financial Post - Feb 16, 2016
MONTREAL - Home reno retailer Rona Inc. wrapped up what could be its last year as a Canadian-controlled company by beating expectations on higher sales in the fourth quarter, though one analyst says this matters little to shareholders as the company ...
RONA Announces a Sixth Consecutive Quarterly Increase in Same-Store Sales and ... - Marketwired (press release)
Lowe's purchase of RONA positive for Island - Manitoulin Expositor
Lowe's Cos to buy Canada's Rona for $3.2 billion in cash to create home ...
Financial Post - Feb 3, 2016
TORONTO • Four years after a failed attempt to acquire Rona Inc., rival Lowe's Cos.' friendly $3.2 billion takeover of the veteran Quebec-based retailer sees the U.S.
What you need to know about the Lowe's-Rona deal - The Globe and Mail
Lowe's Rona deal faces Quebec opposition - Toronto Star
Lowe's Canada CEO says growth, not consolidation after recent Rona acquisition
Financial Post - May 24, 2016
The CEO of Lowe's Canada, Sylvain Prud'homme, says he has found a house just five minutes from the new national headquarters that was relocated here from Burlington, Ont.
Lowe's Canada looks to build brand awareness amid Rona takeover - The Globe and Mail (subscription)
Lowe's Canada begins gradual evolution after taking control of Rona - MetroNews Canada
Rona Inc posts loss, higher revenue, ahead of takeover by Lowe's
Financial Post - May 10, 2016
BOUCHERVILLE, Que. - Rona Inc. says it lost money in this year's first quarter but overall revenue increased despite weak sales in the Prairies.
Lowe's Canada to convert 40 Rona big-box stores next year, but says brand ...
Financial Post - Dec 12, 2016
BOUCHERVILLE, Que. - Lowe's Canada plans to begin converting 40 big box Rona stores to the Lowe's banner early next year, but says the Rona name isn't going away and vows to expand the brand's presence. “Rona is going to be our biggest banner by ...
Lowe's Canada provides overview of its activities, six months after ... - Canada NewsWire (press release)
Quebec hearings begin into sale of Rona Inc.
MetroNews Canada - Aug 25, 2016
Pierre Ouellet told committee members that Jacques Daoust was informed about the intention of government agency Investissement Quebec to sell its 11 million Rona shares for $140 million in 2014, two years before Lowe's paid $3.2 billion for the Quebec ...
Rona puts Metro turnaround expert at helm
National Post - Mar 19, 2013
MONTREAL • Rona Inc. has poached a grocery industry specialist from Metro Inc. as its new chief executive, confirming it will sell its commercial unit as it tries to steer a new path to consistent profitability.
BRIEF-Rona Inc says issuing a voluntary recall on Uberhaus ceiling fans
Reuters - Apr 3, 2017
May 15 A private gauge of U.S. home builder sentiment unexpectedly rose in May to its second strongest level since the housing bust nearly a decade ago, as the existing supply of homes remained tight.
Rona tackles product problems as asset sales loom
National Post - Feb 22, 2013
Peter J. Thompson/National Post Rona continues to weigh what to do with its 30 big box stores outside Quebec, representing 3.3 million square feet of retail space.
New strategy at Rona: Job cuts, potential store closings, narrower product line - Toronto Star
Rona's major renovation too late for some investors - Globe and Mail
Metro's loss of turnaround expert Sawyer is Rona's gain
National Post - Mar 20, 2013
CNW Group/METRO Inc.Metro, Canada's third-largest grocer, has in fact decided not to search for a new chief operating officer for the time being.
Tough turnaround job awaits new Rona CEO Sawyer - Globe and Mail
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for RON.TO to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate RON.TO's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$23.99 Current Price

$14.58 Growth Price (DCF)

Overvalued by 39.23%


Growth Rate Assumed by Market: 111.08%


Future Free Cash Flow Growth Rate: -15.8%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$2.99 NCA Price

Overvalued by 87.52%

$16.22 Book Price

Overvalued by 32.39%


Poor Cash Return on Invested Capital over the past 5 years

RON.TO has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

RON.TO has only created $2.42 of cash for every $100 invested.
Figures in CAD. Fiscal year ends in December
20112012201320142015
Free Cash Flow 120.82M 39.17M 13.36M 77.69M 1.81M
divided by
Invested Capital 2.24B 2.24B 1.91B 1.85B 1.87B
Cash ROIC 5.39% 1.75% 0.70% 4.19% 0.10%

Poor Return on Equity over the past 5 years

RON.TO has shown an inability to deliver strong results for shareholders. This could be due to poor management, RON.TO operating in a highly competitive industry, or having a weak business in general.

RON.TO has only generated $0.78 of Earnings for every $100 of Shareholders' Equity.
Figures in CAD. Fiscal year ends in December
20112012201320142015
Net Income -78.38M 19.08M -35.60M 76.89M 68.05M
divided by
Stockholders' Equity 1.92B 1.85B 1.66B 1.61B 1.57B
Return on Equity -4.08% 1.03% -2.15% 4.77% 4.34%

Excellent Business Performance over the past 10 years

RON.TO has been able to maintain profitability in good times and bad. This could mean RON.TO has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

RON.TO has created positive free cash flow for 9 or more of the past 10 years.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Free Cash Flow 51.26M 43.15M 154.16M 167.06M 12.27M 120.82M 39.17M 13.36M 77.69M 1.81M

Good Balance Sheet

RON.TO's Total Assets double Total Liabilities. Its financial position is adequate. Remember to check Shareholders' Equity to see if it's stable or growing. It's one of the best measures of whether a company is creating value for shareholders.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Cash 58.49M 2.87M 12.35M 239.26M 77.48M 17.15M 21.01M 12.35M 19.01M 1.13M
Current Assets 1.09B 1.14B 1.06B 1.25B 1.32B 1.26B 1.31B 1.04B 1.14B 1.24B
Total Assets 2.11B 2.48B 2.51B 2.75B 2.98B 2.78B 2.81B 2.34B 2.34B 2.48B
Current Liabilities 455.39M 479.98M 453.52M 448.70M 503.54M 522.66M 540.86M 422.47M 462.46M 615.38M
Total Liabilities 974.02M 1.16B 1.01B 970.84M 1.05B 860.28M 960.23M 687.10M 725.26M 916.12M
Stockholder' Equity 1.13B 1.33B 1.49B 1.78B 1.92B 1.92B 1.85B 1.66B 1.61B 1.57B
Current Ratio 2.39 2.38 2.35 2.79 2.62 2.41 2.42 2.45 2.45 2.01
TL-to-TA 0.46 0.47 0.40 0.35 0.35 0.31 0.34 0.29 0.31 0.37

Low or No Reinvestment of Profits over the past 10 years

RON.TO has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to RON.TO operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Retained Earnings 709.47M 892.97M 1.05B 1.16B 1.28B 1.12B 1.07B 879.42M 863.00M 843.44M
Retained Earnings Growth - 25.86% 17.94% 10.32% 10.02% -12.71% -3.98% -17.92% -1.87% -2.27%

Highly Competitive Industry over the past 10 years

It's likely that RON.TO is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely RON.TO invests heavily in R&D and Sales, General & Administrative expenses.

Only $1.87 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 190.58M 185.09M 160.20M 138.25M 143.22M -78.38M 19.08M -35.60M 76.89M 68.05M
divided by
Revenue 4.55B 4.79B 4.89B 4.68B 4.80B 4.80B 4.88B 4.19B 4.10B 4.23B
Net Profit Margin 4.19% 3.87% 3.28% 2.96% 2.98% -1.63% 0.39% -0.85% 1.88% 1.61%

Weak Pricing Power over the past 10 years

RON.TO is likely in a highly competitive industry, due to low barriers to entry. It's because of this, that RON.TO has been unable to raise prices and increase their profitability. This puts them in a poor position if inflation becomes an issue, as they would struggle to pass higher costs onto consumers.

Only $14.87 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Gross Profit 383.88M 400.21M 377.10M 332.99M 344.03M 156.90M 1.34B 1.10B 1.07B 1.14B
divided by
Revenue 4.55B 4.79B 4.89B 4.68B 4.80B 4.80B 4.88B 4.19B 4.10B 4.23B
Gross Margin 8.43% 8.36% 7.71% 7.12% 7.17% 3.27% 27.42% 26.18% 26.04% 27.02%

High Capital Intensity over the past 10 years

RON.TO spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

147.04% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Capital Expenditure 232.17M 233.66M 196.15M 115.71M 111.87M 109.42M 86.37M 61.75M 61.16M 76.10M
divided by
Net Income 190.58M 185.09M 160.20M 138.25M 143.22M -78.38M 19.08M -35.60M 76.89M 68.05M
Capital Expenditure Ratio 121.82% 126.24% 122.44% 83.70% 78.11% -139.60% 452.62% -173.47% 79.54% 111.83%

Strong Dividend History over the past 10 years

RON.TO has consistently distributed a dividend for the past 8 years. This suggests RON.TO is established and will likely continue to distribute its dividend for the foreseeable future.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid - - 2.45M 1.47M 2.45M 23.71M 26.25M 29.74M 28.17M 20.94M
divided by
Shares Outstanding 116.21M 116.41M 116.70M 124.70M 131.25M 129.98M 122.85M 121.78M 118.46M 108.56M
Dividend Paid Per Share - - 0.02 0.01 0.02 0.18 0.21 0.24 0.24 0.19
Price at Year End 20.74 16.97 11.75 15.24 14.11 9.74 10.45 13.14 13.86 12.51
Dividend Yield - - 0.18% 0.08% 0.13% 1.86% 2.03% 1.84% 1.70% 1.53%

History of Stock Buybacks over the past 10 years

RON.TO has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in CAD. Fiscal year ends in December
2006200720082009201020112012201320142015
Shares Outstanding 116.21M 116.41M 116.70M 124.70M 131.25M 129.98M 122.85M 121.78M 118.46M 108.56M
Stock Bought Back - -0.17% -0.25% -6.41% -4.99% 0.98% 5.81% 0.88% 2.80% 9.12%
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