Alimentation Couche Tard Inc. (TSX:ATD.B), one of world’s largest owners and operators of convenience stores and gas stations, announced its fiscal 2018 first-quarter earnings results before the market opened on Wednesday, and its stock responded by rising 2.64% in the day’s trading session. The stock still sits more than 11% below its 52-week high of $68.63 reached back in September 2016, so let’s break down the quarterly results and the fundamentals of its stock to determine if we should be long-term buyers today.
A very strong quarterly performance
Here’s a quick breakdown of 10 of the most notable financial statistics from Couche Tard’s 12-week period ended on July 23, 2017, compared with its 12-week period ended on July 17, 2016.
| Metric | Q1 2018 | Q1 2017 | Change |
| Road transportation fuel revenues | US$6,820.0 million | US$5,661.2 million | 20.5% |
| Merchandise and service revenues | US$2,779.8 million | US$2,532.8 million | 9.8% |
| Other revenues | US$247.4 million | US$226.6 million | 9.2% |
| Total revenue | US$9,847.2 million | US$8,420.6 million | 16.9% |
| Gross profit | US$1,738.8 million | US$1,519.4 million | 14.4% |
| Adjusted EBITDA | US$715.3 million | US$615.7 million | 16.2% |
| Operating income | US$510.8 million | US$458.8 million | 11.3% |
| Adjusted net earnings | US$381.0 million | US$327.0 million | 16.5% |
| Adjusted earnings per share (EPS) | US$0.67 | US$0.57 | 17.5% |
| Net cash provided by operating activities | US$521.5 million | US$413.2 million | 26.2% |
What should you do with the stock now?
It was an excellent quarter overall for Couche Tard, so I think the market reacted correctly by sending its stock higher, and I think it still represents a very attractive long-term investment opportunity for three fundamental reasons.
First, it’s one of the top growth stocks in the industry. Couche Tard grew its adjusted EPS by 6.3% to US$2.21 in fiscal 2017 and by 17.5% to US$0.67 in the first quarter of 2018, which puts it well on its way to achieve the 23.5% growth to US$2.73 that analysts currently expect it to report in the full year of fiscal 2018. The company is expected to achieve double-digit percentage EPS growth beyond fiscal 2018 as well, as analysts currently project 12.8% growth to US$3.08 in fiscal 2019 and have assigned an estimated 16.4% long-term earnings-growth rate.
Second, it’s undervalued. Couche Tard’s stock trades at just 22.4 times fiscal 2018’s estimated EPS of US$2.73 and only 19.8 times fiscal 2018’s estimated EPS of $3.08, both of which are inexpensive given its aforementioned growth rates.
Third, it’s a dividend-growth star. Couche Tard pays a quarterly dividend of $0.09 per share, equal to $0.36 per share annually, which gives its stock a 0.6% yield. A 0.6% yield is far from high, but what it lacks in yield it makes up for in growth; the company has raised its annual dividend payment for eight consecutive years, and its 16.1% hike in November has it positioned for fiscal 2018 to mark the ninth consecutive year with an increase, and I think its very strong financial performance will allow this streak to continue for decades.
With all of the information provided above in mind, I think all Foolish investors should strongly consider initiating long-term positions in Couche Tard today with the intention of adding to those positions on any significant pullback in the future.
