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Discovering Tractor Supply

I've interviewed the CEO of TSCO on my radio show. He may not get the attention of his lesser-performing colleagues, but he sure impressed our listeners with what he was doing to grow his company and its share price.

Valuation: But it doesn't all end with performance. Stocks also have to also make sense from a valuation standpoint. Now that doesn't mean I'm going to go eliminating biotech stocks from my list of companies I'd consider buying, but I also own boring stocks like TSCO.

The consensus analyst estimate for TSCO's earnings next year currently stand at $2.63 per share. The consensus average five-year earnings growth estimate for TSCO is 17% per year.

Given these expectations, the shares currently sport an okay PEG ratio of 1.50. PEG ratio is just one valuation measure, however.

When we take that estimate of $2.63 per share and extrapolate it out over the next five years, we come up with potential earnings per share of $4.94 five years from now.

When I apply a multiple that I think is appropriate for the shares, I come up with a five-year target price of $124 per share. With the stock currently trading at $68.27, I still see considerable upside potential.

Stock Chart: Lastly, TSCO has a very healthy one-year stock chart. See for yourself.

Courtesy of StockCharts.com

I may have never before seen a TSCO TV commercial, ad, or even a store, but TSCO's concept has obviously worked. Of the 3,567 stocks that I track, TSCO currently comes in at Number 8. It also earns a very hard-earned grade of A+. This represents the top 3% of the entire market. I only consider stocks that have a grade of A- or better. Tractor Supply easily makes the grade.

Data from Best Stocks Now App

TSCO is for moderate risk investors. I always have a well-diversified portfolio of 25 to 30 stocks to mitigate my risk. I am also very vigilant on daily basis on the stocks that I own. At the current time, clients of Gunderson Capital Management are long the stock.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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