Critical Review: Leon’s Furniture (OTCMKTS:LEFUF) & Canadian Tire (OTCMKTS:CDNAF)

Leon’s Furniture (OTCMKTS:LEFUF) and Canadian Tire (OTCMKTS:CDNAF) are both consumer cyclical companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Profitability

This table compares Leon’s Furniture and Canadian Tire’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Leon’s Furniture	N/A	N/A	N/A
Canadian Tire	3.63%	10.63%	3.34%

Valuation & Earnings

This table compares Leon’s Furniture and Canadian Tire”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Leon’s Furniture	N/A	N/A	N/A	$0.86	20.00
Canadian Tire	$11.68 billion	0.59	$376.67 million	$4.68	27.97

Canadian Tire has higher revenue and earnings than Leon’s Furniture. Leon’s Furniture is trading at a lower price-to-earnings ratio than Canadian Tire, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Leon’s Furniture and Canadian Tire, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Leon’s Furniture	0	1	3	0	2.75
Canadian Tire	0	5	1	0	2.17

Canadian Tire has a consensus price target of $205.00, indicating a potential upside of 56.64%. Given Canadian Tire’s higher probable upside, analysts clearly believe Canadian Tire is more favorable than Leon’s Furniture.

Insider and Institutional Ownership

84.6% of Leon’s Furniture shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Leon’s Furniture pays an annual dividend of $0.40 per share and has a dividend yield of 2.3%. Canadian Tire pays an annual dividend of $5.30 per share and has a dividend yield of 4.0%. Leon’s Furniture pays out 46.4% of its earnings in the form of a dividend. Canadian Tire pays out 113.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Canadian Tire beats Leon’s Furniture on 8 of the 12 factors compared between the two stocks.

About Leon’s Furniture

Leon’s Furniture Limited, together with its subsidiaries, operates as a retailer of home furnishings, mattresses, appliances, and electronics in Canada. It operates in two segments, Leon’s and The Brick. The company provides repair services for household furniture, electronics, and appliances; home office products; warranties; and credit insurance products, including life, dismemberment, disability, critical illness, and involuntary unemployment. It also operates as a commercial retailer of appliances to builders, developers, renovators, property management companies, hotels, extended care industries, landlords, government bodies, and insurance companies; and engages in the franchise operations. The company sells its products through a network of retail stores under the Leon’s, The Brick, The Brick Outlet, and The Brick Mattress Store banners; and the Brick’s Midnorthern Appliance and Appliance Canada banners, as well as through its websites, including leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservices.com, and applicancecanada.com. The company was formerly known as Ablan Leon Distributors Limited and changed its name to Leon’s Furniture Limited in June 1969. Leon’s Furniture Limited was founded in 1909 and is headquartered in Toronto, Canada.

About Canadian Tire

Canadian Tire Corporation, Limited provides a range of retail goods and services in Canada. It operates in three segments: Retail, CT REIT, and Financial Services. The Retail segment retails automotive maintenance products and accessories, parts, and tires, as well as automotive services and roadside assistance; electrical, hardware, home environment, paint, plumbing, and tool products; cleaning, food & drink, home décor, home essentials, home organization, kitchen, and pet care products; camping, exercise, hockey, hunting, fishing, seasonal recreation, and team sports and golf products; and backyard living, backyard fun, cycling, gardening, outdoor tools, seasonal, and toy products. This segment offers its products under the Canadian Tire, Canadian Tire Gas, Pro Hockey Life, Mark's, PartSource, Helly Hansen, Party City, and SportChek brand names. This segment also participates in loyalty programs, as well as sells its products online. The CT REIT segment operates as a closed-end real estate investment trust that holds a portfolio of properties comprising Canadian Tire stores, Canadian Tire anchored retail developments, industrial properties, mixed-use commercial property, and development properties. The Financial Services segment provides consumer credit cards, in-store financing, insurance products, and retail and broker deposits; and savings accounts and guaranteed investment certificates. Canadian Tire Corporation, Limited was founded in 1922 and is headquartered in Toronto, Canada.