Alimentation Couche-Tard (TSX:ATD) has been among the many top-performing shares on the TSX within the final 20 years. After adjusting for dividends, the highest TSX inventory has returned 540% to shareholders within the final 10 years and is up a staggering 4,130% since January 2004.
Valued at $75 billion by market cap, ATD is now among the many largest corporations in Canada. Let’s see if you can purchase Alimentation Couche-Tard at its present multiples.
The bull case for Couche-Tard inventory
Alimentation Couche-Tard is among the largest comfort retailer corporations globally. It owns and operates a portfolio of manufacturers, together with Couche-Tard, Ingo, and Circle Ok. With a presence in 29 international locations, ATD has gained traction in Canada, the U.S., Europe, and different worldwide markets.
With a coast-to-coast presence in Canada, ATD’s comfort shops are situated in 47 states within the U.S., and it additionally enjoys a number one market share in a number of European markets.
It offers comfort merchandise together with meals and drinks, along with mobility companies in addition to gas and charging options for electrical autos.
ATD operates 14,400 shops, serving 8.5 million prospects every day. The corporate reported income of $71.85 billion in fiscal 2023 (led to April), up from $54 billion in fiscal 2020. A key driver of ATD’s inventory worth is its earnings progress, which elevated by 15.5% yearly within the final 5 years.
Within the fiscal second quarter (Q2) of 2024, ATD reported internet earnings of $819.2 million, or $0.85 per share, in comparison with earnings of $810.Four million, or $0.79 per share, within the year-ago interval.
ATD is an organization that’s pretty recession resistant, permitting it to take pleasure in secure money flows throughout market cycles. Regardless of headwinds resembling inflation and rising rates of interest, ATD has managed to develop its income and earnings persistently.
In current months, it has centered on increasing the rollout of the Internal Circle membership program, which is now accessible in seven U.S. enterprise items protecting 3,000 places and a pair of.7 million members. This membership program ought to end in greater buyer engagement and retention charges for ATD over time.
A give attention to acquisitions
Final November, ATD closed the acquisition of 112 MAPCO websites, permitting it to realize momentum in key markets resembling Alabama, Kentucky, Georgia, Tennessee, and Mississippi.
Final week, ATD accomplished the acquisition of sure European retail belongings from TotalEnergies. It contains the 100% acquisition of TotalEnergies’ retail belongings in Germany and the Netherlands in addition to a 60% controlling curiosity in Belgium and Luxembourg.
The acquisition permits ATD to enter 4 new international locations in Europe, considerably increasing its attain within the continent.
Additional, Alimentation Couche-Tard goals to construct 500 shops within the subsequent 5 years, and this natural progress ought to assist drive earnings and money flows greater going ahead.
Is ATD inventory undervalued?
Regardless of its outsized positive factors, ATD inventory is priced at 17.1 instances ahead earnings, which isn’t too excessive. Furthermore, analysts anticipate ATD’s earnings to rise by 10.2% yearly within the subsequent 5 years, which ought to assist dividend hikes.
ATD pays shareholders an annual dividend of $0.60 per share, translating to a ahead yield of 0.8%. These payouts have risen at an annual price of 25% within the final 10 years.
Analysts stay bullish on ATD inventory and anticipate it to surge 10% within the subsequent 12 months.