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A Top Value Stock That’s Hiding in Plain Sight!

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You don’t need to venture into the TSX Venture exchange to find gems that are priced at vast discounts to their intrinsic value. While your odds of finding market mispricings are higher with smaller-cap stocks, I’d argue that in today’s pandemic-plagued environment, there are opportunities to snag such bargains in the large-cap universe.

There may be more clarity on the vaccine timeline, but there’s still a haze of uncertainty that’s clouding the near and medium term. We still don’t know when the pandemic will end or what some of the longer-lasting effects will be on this market. Tune into the financial media, and you’re likely to hear everything from problematic inflation to deflation to a post-pandemic spending boom and the roaring 20s to a severe depression.

While certain pundits may have conviction in what will happen next, it would be wise for investors to take big-picture predictions with a very fine grain of salt. Nobody knows what we’re in for next. As an investor, you should be ready for whatever Mr. Market throws at you next, whether it be inflation, deflation, stagnation, or booming growth.

In this piece, we’ll have a look at one defensive growth stock that I believe will prosper, regardless of when the pandemic ends and what will follow. Shares of the firm, I believe, are also severely discounted such that its wide margin of safety will help investors better weather any future market-wide pullbacks.

Without further ado, consider Alimentation Couche-Tard (TSX:ATD.B), a large-cap Canadian stock that I think is vastly mispriced to the downside at the time of writing.

Couche-Tard stock in the penalty box

Couche-Tard stock has been under pressure ever since management announced its intention to pursue French grocer Carrefour. Investors and analysts hated the deal, and the stock suffered a big hit to the chin. Although the deal has since fallen through, Couche stock hasn’t recovered, and it probably won’t correct to the upside until management can explain itself to investors and why its stock doesn’t deserve to be put in the penalty box.

I’m not a fan of how Couche’s management team surprised investors. But I think the subsequent sell-off is a buying opportunity, as demonstrated by the recent round of insider buying activity. Investors don’t want to see Couche turn into a grocer. They want acquisitions in the convenience store universe, and I think they’ll get just that as management continues to go on the hunt for deep-value opportunities.

With enough cash and credit to back up the truck on a major grocer or a series of small c-stores, I think Couche stock has enough fuel to power its next leg up, as it looks to put its foot back on the M&A pedal.

In due time, I think the bad taste that management left in the mouths of shareholders will fade. Although management’s intent to pursue a grocer isn’t to the liking of investors, I think investors will eventually accept the strategic pivot after they’ve had more time to digest it.

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Foolish takeaway

Today, the stock is close to the cheapest it’s been in recent memory at just shy of 0.7 times sales. With an ambitious plan of doubling profits in five years (via M&A), I’d say Couche is a recession-resilient growth stock that could be in for a massive re-valuation over the next 18 months.

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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 owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.

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