In this piece, we’ll have a look at one dirt-cheap TSX stock that could have enough catalysts to propel shares past multi-year ceilings of resistance. As you may know, the longer a stock consolidates, the great it could break out like a coiled spring.
Fresh off a quarterly beat, the global convenience retailer finds itself flirting with all-time highs at $46 and change. With a more favourable macro backdrop and impressive results now in the books, I think the stage looks set for a big breakout as soon as July 2021.
Alimentation Couche-Tard: Don’t sleep on the night owl!
Couche-Tard is a convenience store consolidator that I’ve pounded the table on in recent months. The company is fresh off a quarterly beat with a stock that’s flirting with all-time highs not seen since mid-2020.
While only time will tell if the recent touchdown with nearly $47 is the start of a breakout, it’ll be tough for Mr. Market to keep shares down as fuel sales continue recovering and merchandising efforts continue to bear fruit. Moreover, the company is long overdue to pull the trigger on a massive acquisition, or at least a series of smaller scoop-ups.
As you may know, the Couche-Tard of old had the urge to merge, and it always used to make headlines on the M&A front. Of late, though, the company hasn’t been able to put its growing cash pile to work on a sizeable deal. The much-followed pursuits of c-store giant Caltex Australia and French grocer Carrefour fell through abruptly.
Since Couche-Tard has primarily grown by acquisition over the past decade and beyond, the inactivity on the M&A front has been more than enough reason for shareholders to throw in the towel on the stock.
What’s the deal with the lack of deals?
When Couche-Tard makes a deal, it wants to unlock value for shareholders. The incredible managers are more than willing to put in the due diligence to ensure potential synergies heavily outweigh integration risks. And if the synergies aren’t sizeable relative to such risks? No deal will be made.
Couche-Tard isn’t afraid to walk away, even after putting in the homework if the price doesn’t make sense. For that reason, I believe Couche-Tard is worthy of a massive premium for its exceptional stewardship who knows value-creative M&A like few others. The act of deal-making in itself doesn’t create value.
The global c-store (and now grocer) scene is still very much fragmented.
That leaves Couche-Tard with a world of opportunities. In due time, Couche-Tard will strike a deal when the timing and price are in alignment. And once it does, those dormant shares of Alimentation Couche-Tard could really start to take off.
For now, organic growth initiatives are likely to move the needle higher on the stock, and as it tests $47-48, I’d look to bet on a breakout.
Stay Foolish, my friends.
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.