Alimentation Couche-Tard: Canadian Stock Worth Your Attention

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.

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