1 Misunderstood Growth Stock That Could Skyrocket Like a Bat Outta Hell

Alimentation Couche-Tard Inc. (TSX:ATD.B) could make up for lost time over the next year. Here’s why.

| More on:
Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks

Image source: Getty Images.

Alimentation Couche-Tard (TSX:ATD.B) is probably one of the most misunderstood (and mispronounced) stocks on the TSX. The global convenience store consolidator continues to exhibit double-digit growth numbers, but to no avail; Couche-Tard stock itself continues to consolidate the channel it’s been stuck in for nearly three years.

With an apparent dry-up in long-term momentum and less frequent M&A deals being announced, Couche-Tard definitely seems like a once-promising growth stock that has already transformed into a low-growth stalwart. This just isn’t the case, however, as Couche-Tard’s industry is still extremely fragmented, leaving room for what I believe is decades worth of sustained double-digit percentage growth via M&A activities conducted at the international level.

Why has Couche-Tard been lagging lately?

Back when Couche-Tard stock was flying high, an accretive acquisition was announced on a regular basis. Each acquisition resulted in the creation of tremendous long-term value for shareholders as management made deals at modest (or depressed) multiples relative to the potential synergies (or benefits) that could be realized.

Today, Couche-Tard isn’t in the headlines nearly as much as it was five years ago thanks in part to the massive CST Brands and Holiday acquisitions, which have taken much longer to digest than prior small-scale scoop-ups. Couche-Tard’s formula is simple: acquire, integrate, extract synergies, pay off debt, and repeat. The CST Brands and Holiday deals have indeed prolonged the integrate and synergy extraction steps, but it won’t be long until Couche-Tard returns to acquisition mode again as its balance sheet is strengthened.

Moreover, Couche-Tard has spent more effort beefing up all of its locations across the globe, which could be seen as a reintegration step in its own right. It’s an expensive endeavour that clearly hasn’t paid off in the short term, but in the grander scheme of things, I think such responsible efforts will pay massive dividends for shareholders with a long-term mindset.

Something’s going down at the Circle K!

Canadian Mac’s and CST stores are slowly, but steadily turning into Circle K locations with new products offerings and an enhanced in-store experience that aims to to better cater to millennial consumers who value comfort and convenience above all else.

The company has also introduced its Tobacco Club to draw in larger crowds of smokers, and has introduced intriguing new offerings, including fresh produce, improved coffee and baked goods in hopes of boosting same-store sales growth (SSSG) numbers by significant amounts over the next few years.

Thus far, Circle K rebranded CST locations have shown much more promise, with larger crowds flocking into the revamped stores as if strange things were afoot within them!

Foolish takeaway

Management’s SSSG efforts have just begun to yield fruit, with the company experiencing the highest network-wide SSSG numbers in seven years as of its last quarter. SSSG numbers are trending higher, and once management inevitably gets back into M&A mode again, we could see Couche-Tard shares finally rocket past its $68 resistance levels.

Stay hungry. Stay Foolish.

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 owns shares of ALIMENTATION COUCHE-TARD INC. Alimentation Couche-Tard is a recommendation of Stock Advisor Canada.

More on Investing

Oil pumps against sunset
Energy Stocks

Is it a Good Time to Buy in the Energy Sector?

Boosted by a very bullish supply/demand environment, energy stocks like Canadian Natural Resources and Tourmaline have much further to go.

Read more »

Investing

2 Stocks to Buy Offering Better Value Than Air Canada

Air Canada has been a popular stock for years, but despite its low price, these two picks are much better…

Read more »

money cash dividends
Investing

How to Make $373/Month in Passive Income With These 2 TSX Stocks

You could bring in passive income of $4,482 annually, or $373 per month!

Read more »

clock time
Stocks for Beginners

3 Stocks to Start Investing Today

Looking for a set of stocks to start investing today? Here are some great options that offer growth and income…

Read more »

investment research
Dividend Stocks

Young Investors: Create Cash Flow With This Top Dividend Stock

If you're a young investor looking for cash flow, you need a strong dividend stock and solid banking program designed…

Read more »

Illustration of bull and bear
Investing

Is the Stock Market Selloff Over?

Throughout this week, many stocks have been gaining value and rebounding from their lows. So, is the stock market selloff…

Read more »

potted green plant grows up in arrow shape
Investing

Retirement 101: How Investors Can Turn $20,000 Into $500,000 in 25 Years

These top TSX dividend stocks have made some investors rich.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 Superb Dividend Stocks I’m Ready to Buy

The market is full of great options for income-seeking investors. Here are three superb dividend stocks to buy now.

Read more »