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

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

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

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Dots over the earth connecting the world
Dividend Stocks

3 of the Top-Growing Stocks on Earth

Market volatility remains high in Q3 2022, but it’s easy to identify the top-growing stocks on Earth.

Read more »

Profit dial turned up to maximum
Dividend Stocks

1 Undervalued Canadian Dividend Stock to Buy for TFSA Passive Income and Total Returns

This cheap Canadian energy stock provides an attractive dividend yield for TFSA passive income and a shot at some big…

Read more »

money cash dividends
Dividend Stocks

Want Passive Income? 1 TSX Stock for $8/Day in Dividends

If you need cash right away, then this TSX stock can make you passive income from a stable dividend that…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

Canadian dividend stocks make for great long-term buy-and-hold investments.

Read more »

value for money
Dividend Stocks

3 Incredibly Cheap Dividend Stocks to Buy for Dependable Passive Income

Now is an excellent time to load up on Canadian dividend stocks. Here are top picks that are all trading…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Simple TSX Stocks to Buy With $25 Right Now

Canadians with capital of as low as $25 can purchase three simple stocks right now and earn recurring passive income…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

2 No-Brainer U.S. Stocks for Investors in August

Here are two undervalued U.S. stocks to diversify your investment portfolio. They both pay safe and growing dividends!

Read more »