The blistering rise in the share prices of technology stocks has left many investors stunned. As the pandemic continues to roil the world, movement restrictions and persistent border closures have accelerated digital adoption, creating a valuation gap between online retailers and brick-and-mortar businesses.

Tractor Supply (TSCO 1.87%), however, stands out as being a physical retailer that has done surprisingly well during this crisis. America's largest rural lifestyle retailer has seen its shares hit a new all-time high above $200 recently, and the company looks set to continue this momentum as it fires on all cylinders.

There's a tough question confronting investors -- should they sell their shares as the stock hits new highs, or could this be an opportunity to load up as the retailer goes from strength to strength?

A couple holds shovels in a garden, with a brick house behind them.

Image source: Getty Images.

A sparkling set of numbers

Tractor Supply reported stellar results last year, with revenue increasing by 27.2% year over year to $10.6 billion. Comparable-store sales jumped by 23.1% as more people paid attention to their homes and farms during the pandemic. Net income rose 33.2% year over year to $749 million.

The momentum has carried on this year, with the company reporting record numbers for its fiscal 2021 second quarter. Net sales climbed by 13.4% year over year to $3.6 billion, while comparable store sales rose 10.5%. Not only did the number of transactions rise by 4.5% year over year, but people who shopped at the company's stores also spent 6% more than in the prior year. Net income increased by 9% year over year to $370 million, and Tractor Supply also raised its quarterly dividend by close to 50%, to $0.52 per share.

Sticky customers

Growth was also broad-based, with all regions and categories reporting comparable-store-sales growth. As Tractor Supply executed its "Life Out Here" strategy, it also reported all-time highs for new customer retention, while growing the number of members in its Neighbor's Club loyalty program to more than 21 million.

CEO Hal Lawton has shared that the company's mobile app has garnered more than 1.6 million downloads in just one year and takes up one-tenth of e-commerce sales. In addition, new customers are getting younger, which means the company can tap from this demographic for many more years of spending. This once-in-a-lifetime shift, with younger couples starting new homes and adopting pets, should see continued demand for the company's suite of products.

Opportunities for further growth

These enduring trends have led the company to raise its sales and earnings guidance for the rest of the year, with comparable-store sales hitting the low-double-digit range instead of the mid- to high single digits. Tractor Supply believes that sales could rise by $1 billion more than what it originally forecast at the beginning of the year. It's not unreasonable to expect that the company can achieve or even surpass this projection, as it seems to be pulling all the right levers.

Late last year, Tractor Supply had highlighted a $110 billion total addressable market opportunity that it can tap into, as its market remains highly fragmented. Because of this large market opportunity, the company believes it has the opportunity to open up to 2,500 stores total. Its store count as of June 26 stood at 1,955, leaving room for more openings in the years to come.

Acquisitions will also pave the way for the company to grow further, as demonstrated by Tractor Supply's purchase of Orscheln Farm back in February. Orscheln is a farm and ranch retailer, with 167 stores spread out across 11 states. More acquisitions like that can allow Tractor Supply to expand its offerings and bump up its store count.

The best is yet to come

There are two main reasons a company's shares hit a new high. One is exuberance over the company's prospects, an exuberance that often fizzles out when management fails to deliver. The other is that earnings, cash flow, and dividends are rising in tandem with the stock, thus providing strong justification for the rise.

Tractor Supply appears to be firmly in the latter camp, and the best appears yet to come as it continues to execute well. Though its valuation may seem lofty at the moment, Tractor Supply has shown that it can continue to deliver growth in earnings and dividends. Selling such a quality business now would mean missing out on many potential years of future compounding.