RBC Analyst Sees More Upside for Tim Hortons

Sep.30.07 | About: Restaurant Brands (QSR)

Analyst Irene Nattel of RBC Capital Markets is reiterating her bullish outlook on coffee and doughnuts chain Tim Hortons Inc. (THI) with a price target of C$41 and a rating of “outperform.”

“Tim Hortons should deliver 15% average annual earnings growth over our forecast period by leveraging its clear leadership position in Canada while building its position in the United States,” Ms. Nattel wrote in a note to clients.

She said as a franchise the company had high levels of profit, return on capital and equity and generated “substantial free cash flow” which is currently being applied to a $200-million share repurchase program.

But from a valuation perspective, Tim Hortons’ share price still lags its peers in the fast food and fast casual restaurant segment, “implying that there is still compelling upside in the name, in our view,” she wrote.

THI 1-yr chart: