Alimentation Couche Tard Inc. (TSX:ATD.B) is one of the best growth names on the TSX. The company has been growing its earnings at a rapid rate thanks to a fantastic management team led by CEO Brian Hannasch and founder Alain Bouchard. The stock has been relatively flat for the past year, but growth is anything but flat. The company made some huge acquisitions last year which will be catalysts that will drive the stock much higher in 2017.
Last year was one of the worst years for Alimentation Couche Tard with the stock returning less than 5%. The company made some huge steps to unlock long-term value for shareholders through its strategic acquisitions. I believe the weakness is a huge buying opportunity for investors who seek value, growth, and capital appreciation.
The last quarterly report was plagued with temporary issues that will be completely forgotten in just a few months’ time. Investors fled the stock after this underwhelming earnings report and are fearing that growth may be slowing for the convenience store king. This is simply not true. In fact, growth is going to be the highest it’s been in a long time after the acquisition spree the company had last year.
CST Brands is the biggest acquisition to date, and there are many synergies the management team will unlock over the next year. Alimentation Couche Tard is expecting to see a whopping 37% EPS growth this year thanks to some huge deals it made, and I believe the stock is trading at a gigantic discount to its intrinsic value right now.
The company also has a large presence in the U.S. and is poised to benefit from a strengthened American economy under Donald Trump, who is seen as pro-business. Donald Trump wants to decrease corporate tax rates and reduce the amount of regulation that hinders businesses from progressing. I believe the U.S. economy will be given a huge boost over the next few years because of this, and Alimentation Couche Tard will profit greatly.
It’s a common misconception that Alimentation Couche Tard is an expensive stock. The company is growth stock and is also a dividend-growth superstar. There are very few companies as big that can grow earnings as fast. I believe the stock should command a much larger premium over its consumer staples peers on the TSX because of this.
The stock currently trades at a 23.51 price-to-earnings and a 4.7 price-to-book multiple, both of which are in line with their historical averages. The stock pays a 0.6% dividend yield, which may not seem like much, but it’s important to note that this dividend has been increased each year for the last six years.
If you’re a growth investor that seeks deep value, then Alimentation Couche Tard is the stock for you. If you don’t buy this stock now, you’ll surely be kicking yourself later.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any stocks mentioned. Alimentation Couche Tard is a recommendation of Stock Advisor Canada.