Couche-Tard Just Made a Huge Acquisition: Is the Stock a Buy Now?

Alimentation Couche-Tard (TSX:ATD) stock looks way too cheap to ignore after its latest blockbuster deal!

| More on:
gas station, convenience store, gas pumps

Image source: Getty Images

Shares of Alimentation Couche-Tard (TSX:ATD) have been feeling the pressure from the U.S. banking volatility in recent weeks. Despite having nothing to do with the failure of regional banks in Silicon Valley, nearly everything has been falling in sympathy. Indeed, it feels like the Great Financial Crisis all over again, but risks do seem contained, making broader market volatility less of a sign to run for the hills. And more of an opportunity for value hunters to get a bit more for their investment dollars.

Indeed, the failure of Silicon Valley Bank has hogged the headlines, causing many investors to hit the panic button. This news has spread through to the Canadian banks, causing some to ask if the Big Six banks are ready for another round in the ring with a violent Mr. Market. With a Canadian recession potentially months away, it’s hard to be remotely bullish on anything these days.

Couche-Tard stock: First big deal in a while

The haze of bearishness and unease has overshadowed Couche’s biggest acquisition in years. In case you missed it, Couche-Tard scooped up TotalEnergies gas stations in a deal worth $3.3 billion. The blockbuster move will add over 2,000 European stores to the Couche-Tard mix.

Indeed, Couche-Tard’s done remarkably well in Europe. Now, it’s ready to double down on the region, with its latest splash. Like most deals Couche-Tard makes, I believe the company scored a great deal in a geography, where the firm can really unlock synergies.

The deal has been in the making for quite a while. In prior pieces, I’ve noted it was just a matter of time before the firm made a multi-billion-dollar splash on the front of mergers and acquisitions. Now that it has, investors don’t seem all too enthused. And who can blame them with the shockwaves caused by banks south of the border?

Ultimately, I think U.S. banking risks won’t cause some sort of systematic issue. Further, the U.S. Federal Reserve may now have enough reason to hold off on its next rate hike to put investors at ease. Once the situation calms, I think Couche-Tard will be right back to hitting new highs. The TotalEnergies deal is a big one that could help the firm move the needle.

More deal making could in the cards

Though it’s a big splash at a time when valuations are modest, I don’t expect it’ll be the last deal. The company still has acquisitive power in the billions. And as recession winds strike, I wouldn’t at all be surprised if Couche-Tard makes up for lost time with another big deal or two this year.

In any case, don’t expect Couche-Tard to use up the rest of its liquidity just because it can. If it can’t get a great deal, it won’t act. It’s that simple. Like Warren Buffett, Couche-Tard has shown it’s more than willing to hang onto a large cash hoard until the next big value opportunity comes knocking.

Great deals don’t happen often. When they do, you need cash and credit to make a deal happen. Regardless of what markets do next, Couche-Tard stock looks like a steal that’s likely headed higher from here. At 16.1 times trailing price to earnings, Couche-Tard stock looks too cheap.

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 has positions in Alimentation Couche-Tard. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

More on Investing

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive Income: How to Make $90 Per Month Tax Free

You can add this amazing Canadian monthly dividend stock to your TFSA now to generate $90 in tax-free monthly passive…

Read more »

A golden egg in a nest
Dividend Stocks

Investing for Retirement? Check Out These Dividend-Paying Stocks in Canada

Dividend-paying stocks like First National Financial are on sale in June 2023.

Read more »

The sun sets behind a high voltage telecom tower.
Dividend Stocks

Fortis Stock Is a Steady Dividend Player for Your Energy Portfolio

You can rely on Fortis stock for growing dividend income. Aim to buy the stock on market corrections to boost…

Read more »

Family relationship with bond and care

TFSA Investors: Get Ready for Retirement With These Top Stocks

Here are three Canadian stocks to consider right now. 

Read more »

financial freedom sign

Retire on Your Terms: 3 TFSA Stocks for Financial Freedom

Are you in the market for stocks you can hold in a TFSA? Here are three top picks!

Read more »

A plant grows from coins.

Don’t Miss Out on the American Dream: Invest in the S&P 500 for Long-Term Wealth

Canadian investors can chase their own version of the American dream if they choose to snatch up BMO S&P 500…

Read more »

Path to retirement
Dividend Stocks

Investing for Retirement? These Dividend Stocks Can Help You Get There

TD Bank and Brookfield Renewable Partners are two solid dividend-growth stocks to hold for decent total returns through retirement.

Read more »

Businessman holding AI cloud
Tech Stocks

Unlocking Profit Potential: 5 AI Stocks to Watch in 2023

AI stocks such as Nvidia and Microsoft have the potential to deliver outsized gains to investors in the upcoming decade.

Read more »