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Top TSX Stock for January: The $40 Billion Company No One’s Heard of!

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Sometimes you just have to pound the table on a stock. Some stocks are just so good, one might be baffled at the lack of recognition from financial markets from time to time. This is certainly the case for me with respect to Alimentation Couche-Tard (TSX:ATD.B).

This is a company with a market capitalization of more than $40 billion. Additionally, it happens to be a stock it seems so many investors are unaware of. I think this is one of the best hidden gems on the TSX right now. Additionally, I think this is perhaps the best growth-at-a-reasonable-price play for investors in any market.

The $40 billion company that could be a lot bigger by year end

One of the reasons Couche-Tard has grown to the size it has is acquisitions. The company produces very impressive organic growth at its existing locations. That said, the real value with this stock is the acumen of its M&A team. Couche-Tard has been a historical outperformer in terms of creating value via acquisitions. Accordingly, I think growth investors would be well suited picking up shares of Couche-Tard, particularly at these low levels.

The company’s share price has dipped materially in recent days. This follows news that Couche-Tard was exploring a massive deal to acquire French retailer Carrefour in a transaction valued at around US$35 billion. It appears the market is trying to digest such a deal, and the potential ramifications it would have on the combined entity. With the deal now in flux, shares have recovered some of their previous losses. That said, this stock is trading around 15% below its 52-week high of late.

Buying the dip could be a great move right now

I think buying this recent dip makes all the sense in the world right now. Couche-Tard’s valuation of only 15-times earnings is dirt cheap. This is a growth play with the potential to increase capital distributions to shareholders over time. After cutting the dividend as a defensive measure in 2019, Couche-Tard has begun hiking its dividend once again. This is a stock that only yields around 1% today but could yield much more over the long term.

Couche-Tard has a return on equity around 25% and is growing its earnings at around 30% annually right now. That’s extremely impressive, considering the environment we’re in. I can’t think of another company representing the buying opportunity Couche-Tard is right now. I would encourage all value investors to consider this stock at these levels.

Like this top stock? Here are a few others to consider:

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.

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