It’s been quite the turnaround for Alimentation Couche-Tard (TSX:ATD) over the last few years. ATD stock has seen its shares collapse during the pandemic, only to recover incredibly in 2023. So, let’s go over why the stock has been rising in the last year and why it’s likely to continue climbing in 2024.
Over the last five years, ATD stock has seen its earnings before interest, taxes, depreciation, and amortization (EBTIDA) more than double. This comes from both acquisitions and organic growth, and yet the stock still isn’t done growing, management says.
ATD stock is now aiming to achieve around US$10 billion in EBITDA by fiscal 2028. That’s almost double where it was in 2023 at US$5.8 billion. However, this certainly looks doable, given the company continues to surge past earnings estimates quarter after quarter.
This doubling EBITDA would mean that ATD stock currently has a compound annual growth rate (CAGR) of 12% in EBITDA over the next five years. And that could indeed increase higher should the company experience higher fuel margins in the United States.
Let’s not ignore that ATD stock is an excellent merger and acquisition company. It’s expanded throughout the world, not just in North America. The stock expanded to own Circle K companies across the country. It’s now expanded from North America to Europe and Asia. And there’s more growth likely on the way.
With the company seeing so much growth in its EBITDA, it will likely put that to seriously good use through acquisitions. In fact, the company recently announced that it completed the acquisition of European retail assets from Total Energies. This was a 100% acquisition of Total Energies retail assets in Germany and the Netherlands and 60% ownership in Belgium and Luxembourg.
The company has now entered four new countries, expanding its reach even further into Europe. This alone helps the company to identify even more opportunities and for companies to see the success of ATD stock.
All this growth, all this opportunity, and ATD stock remains valuable on the TSX today. The company hasn’t seen as much growth as perhaps it should, as merchandise same-store sales decelerated across the board.
Luckily, fuel margins helped the company continue to see positive improvement. But the key here is that when same-store sales improve once again, there is an even larger opportunity for growth for today’s investors. For now, shares are up 23% in the last year alone, with a potential upside of about 10% as of writing to reach 52-week highs.
For now, ATD stock trades at just 0.84 times sales, a reasonable 18.69 times earnings, and a certainly valuable enterprise value over EBITDA of 14.56. What’s more, it would take just 80% of its equity to cover all its debts as of writing. So, if you’re looking for more growth, more expansion, and a great deal, I would certainly consider ATD stock on the TSX today. You could see shares double by the time the company realizes its five-year potential.