Alimentation Couche-Tard Slips 3.2% on Earnings: Time to Buy?

Alimentation Couche-Tard (TSX:ATD) stock still looks too cheap after a mild post-earnings pullback.

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Shares of convenience store kingpin Alimentation Couche-Tard (TSX:ATD) came into its latest quarter with quite a bit of momentum behind it. Indeed, the quarterly results failed to impress investors, slipping more than 3% immediately after. Undoubtedly, the numbers weren’t as bad as the post-earnings decline suggested. And though the stock has since healed a bit, adding another 1.4% on Monday’s session, I still think there’s plenty of value to be had in one of the TSX Index’s top long-term performers.

At the end of the day, Couche-Tard is a resilient earnings growth firm that may still not be properly valued by Mr. Market. At writing, shares of ATD trade at just south of 19 times (around 18.5 times at writing) trailing price to earnings (P/E), which isn’t all that expensive to pay for a steady growth company that can sail through a potential 2024 economic recession. Indeed, truly growthy consumer staple firms can be worth their weight in gold when we’re in the face of a recession.

Couche-Tard stock slips a bit on earnings: It might be time to buy

For the second quarter, earnings per share (EPS) came in at a solid $0.82, topping the consensus estimate of $0.79. Despite the slight beat, the reaction of analysts varied. Some big-name firms covering the stock trimmed their price targets by the slightest of margins, while others raised theirs. Indeed, depending on what you saw from the quarter, you may have adjusted your financial models to the upside or downside.

In any case, Couche-Tard continues to stand out as a magnificent holding for any Canadian investors seeking to do well over the long run. Of course, the stock, which had ample momentum behind it in recent years, will experience the occasional pullback. Whenever shares do dip a bit (like after the latest round of earnings results), it can prove wise to be a net buyer on weakness.

Couche-Tard stock: Don’t let a lukewarm quarter cloud the long-term tailwinds

Longer-term, Scotiabank (TSX:BNS) analyst George Doumet believes that “longer-term tailwinds should position the company to grow adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by a 12% compounded annual growth rate (CAGR) over the next five years.”

That’s impressive growth for a company that can really put its cash and credit hoard to use over the next couple of years. Undoubtedly, Couche-Tard can grow without making deals. But if the firm can take advantage of an opportunity in the global convenience store space, I have no doubt that its growth could experience a nice jolt.

Deal or no deal, Couche-Tard is not a stock to pick up if you’re looking to make a quick buck off a trade. It’s a long-term play that ought to be worth a long-term position in your Tax-Free Savings Account (TFSA), given the capabilities of management and the long growth runway it still has ahead of it.

The Foolish bottom line on Couche-Tard stock

Couche-Tard stock had a rare dip off recent all-time highs. I’d much rather be a buyer than a seller on such a dip, given the quarter wasn’t as bad as the immediate investor reaction. The long-term growth story is still intact, and if management can execute over the long run, expect momentum to take the stock to greater heights.

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 recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

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