Better Buy: Couche-Tard Stock or Casey’s General Stores?

Alimentation Couche-Tard (TSX:ATD) and Casey’s General Stores (NASDAQ:CASY) are great convenience store icons to consider.

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The convenience store industry isn’t exactly an industry you’d look to for next-level earnings and sales growth. Undoubtedly, retailing can be a tough place to compete, especially in an inflationary environment — that is, unless you can offer discounted prices or a high level of quality on various goods. In any case, the convenience store space is quite interesting in that consumers are slightly less price sensitive versus those who go into the local big-box grocer.

There is just a different set of expectations when one walks into their local Circle K versus the supermarket across town. If you’re going to drive many kilometres and take an hour or so out of your day, you had better get impressive prices or, at the very least, a good value proposition on a wide range of goods.

Sometimes, however, you just want a quick meal, a missing item or two from your recipe, or a delicious Polar Pop. Heck, you may even want something off the grill, fresh produce, a few snacks, or something you may not have considered when you walked through the door.

Convenience store kings are worth owning for growth

In any case, convenience stores remain as relevant as ever. And with better margins than various supermarket chains, I find the growth path to be far better for the industry’s top performers like Alimentation Couche-Tard (TSX:ATD) or Casey’s General Stores (NASDAQ:CASY) south of the border, a firm that Couche-Tard tried to acquire many years ago.

Undoubtedly, Casey’s has been on a hot run in recent years. While the brand may be “the one that got away” from Couche-Tard, I think both names are enticing for growth investors who want exposure to a business they can easily understand but, more importantly, evaluate on a long-term basis. Let’s check in with two heavyweight champs in convenience to see which firm comes out on top.

Couche-Tard

Couche-Tard isn’t just an iconic globally focused retailer (with its exposure in the U.S. and Europe), but it’s also one of the TSX Index’s top-performing stocks over the past several years. In the past five years, ATD stock has handsomely beat the Canadian market, with shares up around 93%. That’s some serious growth for a retailer that sports durable competitive advantages and is one of the wisest managers in the convenience retailing scene.

The company reported some fairly mixed earnings that saw earnings drop amid consumer spending pressures. Though the quarter could bring pressure to shares, I think any dips ought to be bought. Why? The company has plenty of cash to make a big acquisition and lots of room to boost same-store sales as it explores new merchandising options. I would be even more bullish if the firm committed to made-to-order meals, something that’s been a profound hit for other convenience store rivals. Either way, I think Couche-Tard has so many options for growth.

Casey’s General Stores

To say Casey’s stock has been hot of late would be a colossal understatement. The stock has gone parabolic, with shares blasting off more than 37% year to date. Why the explosive momentum? The company’s blowing away earnings, thanks in part to its delicious pizza offerings.

Indeed, Casey’s doesn’t just offer any pizza; it offers some pretty good pizza at affordable prices. Let’s just say it’s a higher-quality product than you’d expect from a convenience store. As pizza draws in crowds, they’ll also probably pick up other goods to go.

At 28.4 times trailing price-to-earnings (P/E) ratio, however, CASY stock goes for a rich premium to Couche-Tard, which trades at 19.1 times trailing P/E. Due to valuation, I prefer ATD stock. However, I see multiple expansion potential if Couche-Tard were to bet big on pizzas, subs, fried chicken, or something of the sort.

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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