Alimentation Couche-Tard (TSX:ATD) has long been a top performing consumer discretionary stock, and its consistent track record of growth and wealth creation for investors has made it a blue-chip stock worth watching. But with the stock’s recent price action raising some questions, is it still a strong buy today?
A legacy of growth and resilience
Since its founding in 1980, Couche-Tard has grown from a small Quebec-based convenience store operator to a global powerhouse. With approximately 16,700 locations spanning across North America, Europe, and Asia, the company has built its success on strategic mergers and acquisitions (M&A) that have expanded its footprint and diversified its offerings. Couche-Tard’s network includes not only convenience stores but also road transportation fueling stations, which drive significant foot traffic and increase sales of higher-margin products.
More than half of its locations are in Canada and the United States, with a growing presence in Europe and Asia. The company is also looking to the future, having begun installing electric vehicle (EV) charging stations in North America after a successful pilot in Norway. This move positions Couche-Tard to take advantage of the expanding EV market.
Consistent long-term performance
Over the last decade, Couche-Tard has delivered impressive annualized total returns of nearly 13%, turning an initial $10,000 investment into approximately $33,846. When dividends are reinvested, that figure rises to about $34,790, showcasing the power of compounding at work. While the dividend yield is modest, the stock’s ability to generate steady earnings, even during economic downturns, is a key factor in its long-term appeal.
The company has proven to be recession-resistant, with earnings that remain relatively stable during tough economic times. When earnings do dip, they rebound quickly, which bodes well for long-term stock price appreciation. Couche-Tard’s consistent growth in earnings per share has driven its steady rise in stock price, making it a good consideration for patient investors.
Challenges and opportunities ahead
That said, 2024 has seen the stock struggle to gain significant momentum, with only a 6% increase over the past year. Technically, its stock price action draws out a “W” shape this year with no clear break to new highs. For investors looking for a breakout, the stock needs to clear the resistance level around $85 to push higher.
Valuation-wise, Couche-Tard appears fairly priced. Trading at $80.59 per share, it has a price-to-earnings (P/E) ratio of approximately 19.8, which aligns with its expected earnings growth rate of 10% annually over the next couple of years. Analysts have set a 12-month price target of $91, suggesting a near-term upside potential of about 13%.
The company’s management remains optimistic about growth prospects, particularly through acquisitions in Latin America, Southeast Asia, and the fragmented U.S. market. Approximately 60% of U.S. convenience stores are still individually owned, leaving ample room for Couche-Tard to expand its footprint. Additionally, the company is focusing on organic growth strategies to help drive its future success.
A reliable dividend stock
Couche-Tard is also an attractive choice for dividend-growth investors. The company has increased its dividend for about 14 consecutive years, with an amazing 15-year dividend growth rate of 24%. Investors who bought the stock 15 years ago would have seen their yield increase from about 1% to a remarkable 20% yield on cost, demonstrating the powerful effects of compound growth.
The Foolish investor takeaway: Is Couche-Tard stock a buy?
While Couche-Tard’s stock has not shown explosive growth in recent months, its long-term track record of resilience, steady earnings growth, and consistent dividend increases make it a good consideration for long-term investors. If the stock can break through key resistance levels, it may be poised for further gains. With its focus on both acquisitions and organic growth, Couche-Tard continues to be a solid choice for those seeking both stability and growth in the convenience store and retail sector.
