Alimentation Couche-Tard Stock: Buy, Sell, or Hold?

Alimentation Couche-Tard (TSX:ATD) stock is still a great long-term pick at new highs above the $80 level.

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Alimentation Couche-Tard (TSX:ATD) stock surged past the $80 mark on an upbeat Wednesday for the broader markets. The convenience store kingpin has continued to march steadily higher over the past two years, even as the rest of the market (TSX Index and S&P 500) experienced a surge in turbulence.

Indeed, the company’s earnings growth has been dictating the positive trajectory of the stock. And though high rates and a potential economic downturn may cause another slump in the broader markets next year, I wouldn’t bet on Couche-Tard shares to give up the past few years’ worth of gains.

To put it simply, the company is thriving in this high-inflation, high-rate world. Consumers still value convenience, and over at the local Circle K, they can pretty much have their cake (competitive prices, especially with private-label brands) and eat it, too.

Of course, Couche-Tard’s impressive balance sheet is helping to draw investors in as costs of borrowing continue to rise. Purchasing power matters more than ever at a time like this!

Its disciplined and patient managers make Couche-Tard a truly wonderful business

Undoubtedly, the company wants to put some of its cash and credit to work on a synergy-rich acquisition target. However, if there’s nothing that really stands out as a value creator, management is disciplined and patient enough to sit on its hands by doing nothing, even during times when it was pretty shameful to be overweight cash when rates were low.

Indeed, the tables have turned in a major way, with rates climbing to the highest they’ve been in recent memory. Cash went from being trash to being a balance sheet stabilizer. If rates stay high into 2024, cash will continue to be king. And Couche-Tard is likely to retain its throne.

Regardless of what comes next, I believe Couche-Tard will continue to act as it always has, as an owner. Indeed, its managers act like they’re running a family business and are fully focused on the long term. Had Couche-Tard’s managers been all about making a quick buck and scoring the big annual bonus, the company probably would have exhausted its liquidity by now on deals that may not have had much, if any, synergies.

The secret to Couche-Tard is its ability to grow earnings at a steady pace over time is really no secret. It’s grown primarily via mergers and acquisitions over the years. Of late, though, the company has shown it can grow without wheeling and dealing on a consistent basis. If nothing stands out on the acquisition front, the company still has a plan to better itself. This alone, I believe, makes the stock worth a larger premium than has been commanded in the recent past.

Couche-Tard stock: What about valuation?

At writing, Couche-Tard stock is at a fresh new high at $80 and change. Yet the 19.05 times trailing price-to-earnings multiple still doesn’t seem all that high, given the calibre of steady, recession- and inflation-resilient growth you’re getting.

Though I’m no chaser of stocks going parabolic, I refuse to sell my shares and would look to add on any steep dips going into the new year. Couche-Tard’s magic formula can still help ATD stock beat the TSX Index by a wide margin over the next 10 years and beyond. Of course, there will be twists and turns. But if you’re a long-term investor, it’s hard not to be in the name at a time like this!

My takeaway?

Couche-Tard stock’s still a great value at these new highs. I think new highs are right up ahead as the firm integrates its TotalEnergies deal effectively while staying aware of what’s up for sale in the global convenience store scene. Perhaps a spot in one’s Tax-Free Savings Account ought to be reserved for the TSX-crushing retail giant.

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.

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