Shares of Alimentation Couche-Tard (TSX:ATD) have been incredibly robust this year, with shares consistently hitting higher highers through the year despite the recent surge in market volatility. Year to date, ATD stock is up an impressive 23%, outpacing the TSX Index, which is pretty much flat for 2023. Looking ahead, I’d bet we’ll see more of the same from Couche-Tard as it continues on its growth track.
Even if Canada is bound for an economic recession at some point over the next six months, Couche-Tard seems to have all the tools to continue getting better with time, as it continues creating immense value for shareholders. If anything, a global recession could be a plus for Couche-Tard, at least over the long run. Indeed, the company has billions in acquisition power (around US$10 billion, according to its chief financial officer, Filipe Da Silva). And if valuations across the convenience store or grocery scene contract, the company will be able to get more bang for every buck.
For now, Couche-Tard is fine with its substantial liquidity position as it waits for the perfect pitch before it looks to swing the bat. Once it does swing, new investors can probably expect more home runs from a firm whose hitting average seems to be out of this world!
At this juncture, Couche stock is flirting with new highs again at $74 and change. And though shares trade at a richer 17.8 times trailing price-to-earnings (P/E) multiple, I still think it’s undervalued given its long-term growth potential that’s not about to slow anytime soon, at least not after learning of the firm’s new five-year strategy to jolt profits.
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Couche-Tard’s new five-year plan entails more growth to come
The company has grown impressively over the past few years. Looking to the next five, investors should expect more to come. The firm is still very much in growth mode, as it looks to expand while simultaneously pursuing efforts to improve efficiencies. Over the years, the company has not just shown it’s a great industry consolidator. Still, it’s also good at driving organic growth while keeping operations in a good spot, even with macro uncertainties considered.
For the next five years, the firm is shooting for earnings before interest, taxes, depreciation, and amortization (EBITDA) of US$10 billion by its fiscal year 2028. A good portion of the EBITDA growth will come from acquisitions. However, if no great deals come along over time, don’t expect the firm to be in a hurry to make a deal happen. Couche-Tard’s top bosses know better than anyone that deals only make sense if the price is right.
In the meantime, Couche-Tard seems poised to keep on winning.
“We play to win,” said Chief Executive Officer Brian Hannasch, a top boss who’s been magnificent at the helm over the past few years.
The Foolish bottom line
Couche-Tard may be bigger (with a market cap now north of the $71 billion mark). But it’s not about to take its foot off the gas. Not while the global total addressable market remains ripe for consolidation. Over the coming years, look for Couche-Tard to keep pursuing takeovers.
The more sluggish the economy, the more Couche-Tard can get for its money. Either way, the firm seems poised to keep on winning. And that makes it a great buy, even at a nearly all-time high.
