Alimentation Couche-Tard (TSX:ATD) has continued to be one of my top picks for long-term investors for roughly a decade. There’s good reason for this view. And over the long term, this pick has proven to be quite a winner, as the chart below shows.
However, investors today ought to be more forward looking than backward looking. Indeed, stocks are typically valued as the present value of their future cash flows. So, an investment in Couche-Tard today needs to be justified by assessing the company’s long-term potential and its upside relative to its past performance.
In that regard, here are two key things I’m thinking about when I look at Couche-Tard through a long-term lens in 2025. In my view, these are the two most important factors for investors to consider when they look at this retail giant right now.
Acquisition potential over time
One of the key growth drivers Couche-Tard investors have benefited from in the past is the company’s ability to continue to consolidate a very fragmented gas station/convenience store sector over time. Couche-Tard has grown to its current size by utilizing a strategy of both growing organically (seeing same-store sales increase over time) and using leverage to acquire other under-performing gas stations and convenience stores and converting them to the company’s core banners.
Again, this strategy has worked wonders, as the chart above indicates. But the question I think investors need to pose when looking forward is how much opportunity is really out there in the future.
The company’s bid to acquire 7-11’s assets as well as a prominent French retail chain have (seemingly) failed. And the bigger Couche-Tard gets, the larger the deals the company will need to pursue to keep growing at its past pace.
Earnings growth over revenue growth
I think that as Couche-Tard continues to transition toward becoming a more mature company, investors will continue to demand more in the way of bottom-line growth over time.
In recent years, Couche-Tard has actually outperformed my expectations on both the top and bottom lines. However, this is a trend that will need to continue in the quarters and years to come. As most investors are well aware, the market is a measuring tool. Each and every quarter, a new earnings release sheds light on how a given company is performing on a range of metrics.
In order for Couche-Tard to continue to see the kind of capital appreciation we’ve seen in the past and be viewed as a growth stock worth buying, this growth will need to continue.
The bottom line
In my view, Couche-Tard still looks like a solid holding over the next 5- and 10-year periods (and longer). For those with a truly long-term investing time horizon, the company’s outlook remains robust, and I think continued outperformance is more likely than not.
