Many investors may already be keenly aware of Alimentation Couche-Tard (TSX:ATD), as it is one of the best-performing stocks in the Canadian stock market. Couche-Tard has been making headlines due to several ground-breaking developments, leading this stock to continuously break new all-time highs. With this sort of performance, many may be wondering if it is too late to invest in ATD stock.
Indeed, given the run Couche-Tard has been on, some investors may certainly have reason to be wary. After all, such rallies are typically highly correlated with ballooning valuations. What we see in the tech sector is evidence of this.
However, this isn’t the case with Couche-Tard. Despite surging to new all-time highs this year, the stock trades at only 18 times earnings. That’s relatively inexpensive for a stock with the growth profile Couche-Tard has, making this among the top value stocks I’m watching right now.
What to know about Couche-Tard
Alimentation Couche-Tard operates a network of convenience stores across various parts of the world. The company’s geographical diversification is notable, with locations in Russia, North America, Scandinavia, Poland, and Ireland. The company primarily generates revenue from selling fuel and consumables.
Couche-Tard’s products and services include beverages, groceries, quick service restaurants, tobacco-related products, car wash services, fuel, etc. The company operates under the Circle K banner in certain jurisdictions, including China, Malaysia, and Egypt. Around the world, Couche-Tard operates a whopping 16,700 stores across 29 countries and employs 150,000 employees.
Alimentation Couche-Tard’s revenue from external customers can be segregated into three categories, namely merchandise and services, road transportation fuel, and other.
Earnings growth driving the company’s valuation
As mentioned, how a company’s stock price surges matters. Whether it’s due to multiple expansion or fundamental growth makes a big difference in the type of investors involved in such businesses. In the case of Couche-Tard, it’s clear that earnings and cash flow growth are really the core drivers of this business. That’s something I like, as it indicates longer-term value-oriented investors may be more inclined to hold this stock, leading to more consistent returns over time for new investors.
Couche-Tard’s stock price has been on a tear, largely due to a 29% surge in its earnings per share over the last financial year. Moreover, over the last decade, Couche-Tard’s earnings per share have grown at an average rate of 22%. That’s impressive and is the sort of fundamental driver many investors are looking for.
Additionally, Couche-Tard’s earnings before interest, taxes, depreciation, and amortization grew at a whopping 19.8% in 2023. Thus, the stock’s performance over the past year can certainly be warranted by these numbers. On the dividend front, Couche-Tard does pay out a relatively small yield of just 0.7%, made smaller by recent share price appreciation.
Bottom line
For those trying to understand what Couche-Tard does and why this previous under-the-radar stock is now flying high, hopefully, this background can help investors assess whether this stock may be worth researching further. Indeed, Couche-Tard is one of the best fundamental stories in the Canadian market, in my view. All long-term value and growth-oriented investors may want to consider this stock on any dips moving forward.
