When it comes to ranch and farm equipment, Tractor Supply Company (NASDAQ:TSCO) is probably the first retailer that comes to mind. The company is the largest rural retailer in the U.S. and sells a wide array of inventory ranging from pet food to lawn equipment.

Shares of Tractor Supply Company have been hitting new all-time highs and are up over 40% year to date, even as the world grapples with the COVID-19 pandemic. At these levels, the company is trading at a trailing price-to-earnings ratio of around 28 times.

Is this surge merely exuberance, or does the stock still qualify as a buy?

Man on lawn mower in the middle of a field

Image source: Getty Images.

Sturdy financials

Tractor Supply has demonstrated consistent growth over the last five years. Sales increased from $6.23 billion in 2015 to $8.35 billion in 2019, while net income improved 37% from $410.4 million to $562.4 million over the same period. As share count fell thanks to share buybacks, earnings per share increased 55.3% to $4.66. Shareholders have also been amply rewarded by annual dividends that have almost doubled from $0.76 to $1.36 per share.

Operational data also looks solid with gross margin holding steady at 34% and net margin hovering in the 6% range. Store count has been steadily increasing from 1,488 to 2,204, and Tractor Supply has reported positive comparable -store sales growth every single year. The first quarter of 2020 was no exception, either. Net sales increased 7.5% year over year, while earnings per share jumped 12.7%, and this happened despite the onset of the COVID-19 pandemic.

Even as the U.S. reels from the lockdowns and movement control restrictions in April and May, many still patronized Tractor Supply's stores or ordered goods online for pick-up, thus contributing to steady sales for the company. On May 26, management provided second-quarter guidance with the company expecting comparable sales to grow 20% to 25% thanks to "record sales across its channels, product categories and geographic regions."

The right investments

CEO Hal Lawton has articulated the company's strategy for managing through the pandemic in the latest earnings conference call. He observed significant changes in consumer shopping behavior such as trip consolidation (resulting in bigger basket sizes) and a preference for contactless payments (to avoid contracting the coronavirus). Tractor Supply is adapting well to customers' requests for safety and has arranged for more curbside pickup and home delivery options.

The retailer is capitalizing on the opportunities created by the crisis to shift its capital spending in ways that will reassure customers and boost the overall business. More than 70% of those who buy online for in-store pick-up use the new curbside pick-up option. Mobile point-of-sale hardware capacity has been boosted by 50% in stores to provide a better customer shopping experience and enhanced convenience during such challenging times. All these measures help to make the shopping trip seamless and hassle-free, thus engendering stronger loyalty among customers and also endearing new customers to the brand.

Tractor Supply also continues to hire even through the pandemic with plans to fill more than 5,000 full-time and part-time positions across its stores and distribution centers.

A solid and impressive track record

Tractor Supply already had an impressive track record of financial and operational growth before the pandemic. However, this crisis has shown how well the company can adapt to unprecedented operating conditions.

As farming is considered an essential service that has to go on even during a pandemic, Tractor Supply's range of products can also be classified as "pandemic-proof." This offers investors peace of mind when buying into the company, as it's close to business even when shopping malls, restaurants, and many other retailers have closed up shop.

The company's commitment to customer safety and its culture of innovation and adaptation make the business a great one to own over the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.