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1 Top TSX Stock to Buy Right Now in February

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I think Alimentation Couche-Tard (TSX:ATD.B) is perhaps one of the best growth companies on the TSX right now. Despite what I think, it appears the market is more bearish with regards to the growth potential of this stock.

In this article, I’m going to discuss why I think Couche-Tard could be one of the best-performing stocks in February.

Acquisitions are a good thing for Couche-Tard

It’s difficult to understand the rational of the market right now. Couche-Tard is a growth-by-acquisition play. This is what the company does. It acquires companies at good prices and increases their value over time via synergies, operational improvements, and scale.

Typically, acquisitions are viewed positively by the market in the case of Couche-Tard. However, this stock saw a precipitous drop when the company announced its bid to acquire French retailer Carrefour. This dip is not something that made sense to me.

Maybe the deal was a bit overpriced. If that’s the case, the fact that Couche-Tard walked away from the deal should be a good thing. If anything, this stock should be trading above its pre-acquisition announcement price. However, Couche-Tard stock is still trading substantially below these levels and is down more than 10% year to date.

Near-term acquisition potential should be a positive

Couche-Tard has a significant amount of balance sheet room to engage in additional acquisitions. Whether this comes in February or not, I think the company is working hard to identify new targets and make deals happen.

Investors need to keep in mind that this is actually a stock that has been under pressure of late due to a lack of acquisitions coming to fruition. In my mind, the company should be rewarded for being prudent and should be rewarded for not undertaking overpriced acquisitions. Furthermore, it should be applauded for making acquisition offers at a reasonable scale so as to impact its bottom line.

Indeed, a company with a growth-via-acquisition model like Couche-Tard needs to be much more careful when it reaches the size it has. Whether it’s political risk, like what we saw play out in the Carrefour bid, or just a premium that doesn’t make sense, Couche-Tard has shown the ability to walk away from deals. This is a very good thing for investors.

Couche-Tard is not willing to gamble with its invested capital. Rather, this is a company that makes only the acquisitions that make sense with returns it sees as profitable long term.

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

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