Alimentation Couche Tard Inc. (TSX:ATD.B) is your typical “Warren Buffett business.” It’s got a simple and proven business model and a top-notch management team that knows the industry very well.
The company has been an earnings-growth king over the past few years, but the stock has recently pulled back to the low $60 level because the entire defensive sector is going out of favour with many investors. I believe this pullback is a huge buying opportunity for investors looking for growth at a reasonable price. The company is not done growing: it’s firing on all cylinders, and we can expect huge synergies to be unlocked over the next few years that will drive long-term value for shareholders.
The management team are convenience store M&A specialists who know how to drive synergies through the roof. They are relentless cost cutters that strive for operational excellence. The incredible management team can be compared to that of 3G Capital, the incredible management team behind Restaurant Brands International Inc. and Kraft Heinz Co.
The management are fantastic deal makers that have a long-term focus in mind. They’re value-conscious and are not afraid to walk away from a potential deal if the price isn’t right. They’re industry experts that know how to drive operational efficiencies like no other.
It’s a common misconception that Alimentation Couche Tard is an expensive stock. It’s a growth stock that is also a dividend-growth superstar. Sure, a 0.6% dividend yield may not seem like much, but it’s important to note that the company increased its dividend almost every year over the last decade.
The management team is always on the hunt for the next great acquisition, and you can be sure they won’t make an acquisition if it won’t drive long-term value for shareholders.
The stock has had a fantastic 21.96% ROE and a 15.02% ROIC over the last 12 months. These are two important metrics that Warren Buffett likes to look at when evaluating a business, and he would be very impressed by the consistent ROE and ROIC the company has put up over the past decade.
Alimentation Couche Tard is forecasting a whopping 37% EPS growth for 2017, and this could send the stock into the atmosphere. The company is not slowing down; in fact, it’s picking up momentum as it closes its largest acquisition ever.
I believe Alimentation Couche Tard is both a growth and a value stock at current levels. It’s trading at a huge discount to its intrinsic value and has pulled back enough such that there’s a significant margin of safety if one were to buy the stock today. Foolish investors should seriously consider initiating a position today as the stock is set to soar as we head into the latter part of 2017.
Stay smart. Stay hungry. Stay Foolish.
