NEW YORK (TheStreet) -- Shares of Tim Hortons Inc. (THI) are spiking, up 15.17% to $73 in pre-market trading this morning as Canada's biggest seller of coffee and doughnuts plans a merger with Burger King Worldwide (BKW) , Bloomberg reported.
The Deal's Jonathan Marino and Sarah Pringle take a closer look at what the proposed merger would mean for Tim Horton and Burger King:
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The tax inversion deal would move Burger King's base to Canada, Bloomberg noted.
Canada's corporate tax rate is 26.5% compared to 40% in the U.S., according to accounting firm KPMG.
Separately, TheStreet Ratings team rates TIM HORTONS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate TIM HORTONS INC (THI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, reasonable valuation levels, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 9.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TIM HORTONS INC has improved earnings per share by 13.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, TIM HORTONS INC increased its bottom line by earning $2.81 versus $2.58 in the prior year.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, TIM HORTONS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- You can view the full analysis from the report here: THI Ratings Report
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