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1 Beaten-Up, Top TSX Stock to Buy Today

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Alimentation Couche-Tard (TSX:ATD.B) has not been treated well by the markets of late.

In fact, this company has traded sideways for the past couple years. There have been a few peaks and valleys since then, but its stock price doesn’t look like what one would expect from a growth company.

That said, I think Couche-Tard’s long-term growth potential remains intact. Furthermore, I think this is one of the best growth-at-a-reasonable-price plays on the TSX today.

Here’s why this stock has taken such a beating of late and why investors should ignore the noise.

Move into retail disliked by the market

The failed bid for French retailer Carrefour spooked some investors. Many believed the deal was too big, while other criticized Couche-Tard’s management team of over-reaching and pursuing a deal outside the company’s core competency range.

However, Couche-Tard has a best-in-class business model at generating excellent sales metrics for its locations. The idea that these strategies could translate well to a grocery retailer is not far-fetched. Rather, unlike the market, I’m disappointed the deal didn’t go through.

I think Couche-Tard is looking to grow in a diversified way. Thus, I think the market should interpret this failed bid as a progressive growth company looking for value wherever it can find it. That’s not a bad thing. Couche-Tard’s management team is one of the best at acquiring companies and improving the returns of these targets over years via synergies and operational improvements. However, it appears many have lost faith.

Long-term secular headwinds not friendly to growth investors

Couche-Tard’s earnings have not impressed investors of late, and for good reason. The pandemic has affected how much we’re all driving. Accordingly, it can be expected that gasoline sales as well as sales made at the company’s convenience store locations are down considerably.

Additionally, some may be concerned that over time, gas stations will simply be a declining business. The dramatic acceleration in EV adoption could indeed result in a long-term secular decline for this niche sector.

That said, even with EV adoption rates accelerating, Couche-Tard has years to adapt to a changing environment. This is precisely why I liked the company’s bid for Carrefour so much. Couche-Tard is attempting to move out of a sector that may be approaching decline toward one with long-term staying power and modest growth potential.

Additionally, in the short term, I think Couche-Tard represents one of the best reopening plays on the TSX right now. We will all eventually get back to our commuting ways. Maybe not this quarter or next, but investors in Couche-Tard need to have some foresight with this stock, in my view.

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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 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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