Why Patience Is Key With Long-Term Winner Couche-Tard Stock

Here’s why long-term investors would do well to avoid noise and hold Alimentation Couche-Tard (TSX:ATD.B) long term.

| More on:
Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance

Image source: Getty Images

North America’s leading convenience store chain, Alimentation Couche-Tard (TSX:ATD.B), has finally seen some signs of life of late. The company’s recent strong earnings report has brought many investors back to the table on this growth stock. Indeed, an improved economic outlook makes Couche-Tard stock appear to be cheap, relative to its growth potential.

I’ve been pounding the table for some time on Couche-Tard as a top pick. That said, with this stock finally climbing toward its 52-week high, it appears the market is seeing this stock the same way. Here’s why I think more upside could be in store for shareholders in Couche-Tard stock.

Why Couche-Tard stock could continue to see momentum

Despite rather solid numbers and a defensive business model, Couche-Tard stock has been under pressure for some time. Indeed, the pandemic provided a big blow to the company’s quarterly earnings over this past year.

That said, better-than-expected earnings recently announced by Couche-Tard has shifted the discussion toward the future. Couche-Tard stock appears to be on the precipice of providing investors with some impressive growth on the horizon. Accordingly, investors appear to be eager to dive into this play before it runs up further.

From a fundamentals standpoint, even after this recent run-up, Couche-Tard stock is cheap. Indeed, this company still trades at a price-to-earnings multiple of only 15. Given the potential for continued consolidation in the gas station and convenience store business, more in the way of growth could be on the horizon for Couche-Tard from here.

Investors appear to be regaining patience in this slow-and-steady growth stock right now. A lack of deal flow, and a large failed bid for French grocer Carrefour somewhat soured the investment thesis for Couche-Tard stock. That said, plenty of M&A opportunity remains. If the company can get back to its core fundamental growth model soon and continue to grow its market share internationally, the sky is the limit in terms of the capital appreciation investors in Couche-Tard stock could see.

Bottom line

I think the key thing investors in Couche-Tard stock need to be reminded of is that this is a company to be patient with. Couche-Tard has shown its ability to provide growth over very long periods of time. Over the short term, volatility can impact the thesis for growth names such as Couche-Tard.

However, over the longer term, I have faith in the company’s management team. Indeed, Couche-Tard has proven itself to be one of the most prudent acquirers in the growth-by-acquisition space. The company’s dealing in a highly fragmented industry with tonnes of synergy potential. Should Couche-Tard effectively tap into this market in a bigger way in the years to come, investors stand to benefit.

Couche-Tard stock is one investors should buy and forget about. Ignoring the noise and buying dips is a strategy that has worked well in the past. Indeed, I expect the same will work well in the future.

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 stocks mentioned in this article. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »