Alimentation Couche-Tard (TSX:ATD) is a top Canadian gas station and convenience store operator that’s seen impressive long-term growth. One look at the company’s stock chart below tells the story every investor will want to know. For those seeking double-digit capital appreciation for years to come, this is a top value stock I’d consider, trading at a relatively attractive 19-times earnings at the time of writing.
With such a multiple, and long-term growth prospects, let’s dive into where Couche-Tard could be headed five years down the road.
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A business model worth owning
Alimentation Couche-Tard owns a network of convenience stores in North America, Ireland, Scandinavia, Poland, the Baltics, and Russia. The company primarily generates revenue by selling tobacco products, groceries, fresh food, quick service restaurants, and, of course, gasoline products.
For about the past 10 years, Couche-Tard has been among the top performers on the TSX and offered consistent growth due to its business expansion into Europe. The company’s consistent expansion strategy led to consistent growth in its share price. Thus, with plenty of room for consolidation globally, this is a company that’s not only got a great valuation, but is well-positioned as a growth stock to consider buying right now.
Valuation makes sense
Couche-Tard’s stock price certainly hasn’t traded without volatility. And although this company is recession-resistant, the pandemic did hit the company hard as work-from-home dynamics changed commuters’ behaviour, and convenience stores were shuttered for a period of time.
Coming out of the pandemic, Couche-Tard’s fundamentals exploded, as one might expect. The company is now valued at a market capitalization of roughly $80 billion and carries a beta of 0.87. This means that the stock is likely to move in a less-volatile fashion than the overall market, positioning this company as a defensive value/growth play.
Impressively, Couche-Tard stock also pays out a dividend yield of 0.7%, making the stock one income investors can also include in their portfolio. And with an aforementioned price-to-earnings multiple under 20 times, there’s a strong case to buy this stock at current levels and hold for the long term, despite Couche-Tard’s continuous ascent higher.
Where will Couche-Tard stock be in five years?
Predicting exactly where a stock will trade over any time frame is impossible to do. The best we can do is look at the company’s historical performance and extrapolate from there.
It’s my view that Couche-Tard has a fundamentally sound business model, and its growth profile should remain relatively consistent for years to come. Accordingly, I think with valuation multiple expansion and its continued growth rate, a doubling from current levels to around $160 per share is certainly within reach over this time frame.
Of course, a number of factors could derail this thesis. But for those thinking truly long term, there are few better options on the TSX right now to consider buying and holding long term.
