Alimentation Couche-Tard (ATD.B) is probably a name most investors have never heard of. It’s a Canadian exclusive that may be worth the trouble for American investors.
Couche-Tard is a Quebec-based convenience store chain that is better-known to Americans by its Circle K banner. The company has been very successful with its growth-by-acquisition strategy, which has not worked out for many firms lacking discipline.
With a plan to expand to various parts of the world, Couche-Tard also has the means to grow at an impressive rate, even as its market cap swells into mega-cap territory. Indeed, the industry remains fragmented, especially from a global perspective.
The Circle K owner isn’t just a roll-up of mom-and-pop convenience stores or gas stations, though. It has one of the best management teams in Canada.
I am incredibly bullish on shares of Couche-Tard. (See ATD.B stock charts on TipRanks)
Value in the great north?
Couche-Tard stock has a price-to-earnings multiple of 15.7. The company hasn’t been wheeling and dealing as much as investors would have liked, possibly due to a lack of bargains in today’s frothy market. Regardless, Couche-Tard is a stock that investors seem to discount for one reason or another.
Perhaps it’s the low-tech business model, the disruptive impact of EVs on gas stations, or less frequent M&A activity?
In any case, Couche-Tard is a stock that has a roadmap to really grow its net profits. Whether it be via acquisitions, same-store sales growth initiatives, or the inclusion of margin-enhancing items (think private label merchandise), Couche-Tard has a lot going for it.
Shrinkflation: A Potential Catalyst?
There’s nothing like the power of a good brand. Still, the continued rise of private-label and off-brand products cannot go ignored.
The recent rise in inflation has not just caused price increases on food items; it’s caused something far less noticeable: shrinkflation. Many consumer-packaged goods manufacturers are not inflating their prices, but rather reducing the amount of product regularly sold.
For Couche-Tard, its private label could get a nice boost, as consumers take notice of the shrinkflation going on at the snack aisle. Private-label brands are not only cheaper, but they can get an edge over branded products by mitigating the effects of broader shrinkflation on foodstuffs.
Couche-Tard’s private label holds tremendous promise as a margin enhancer. As more consumers discover the quality of its brand in the hunt for a better value, Couche-Tard’s margins could really shine through as the company continues its ambitious growth plan.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, ATD.B stock comes in as a Moderate Buy. Out of 12 analyst ratings, there are eight Buy recommendations, and four Hold recommendations.
The average ATD.B price target is C$57.33. Analyst price targets range from a low of C$45 per share, to a high of C$75 per share.
Disclosure: Joey Frenette owned shares of Alimentation Couche-Tard at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
