Shares of Canadian convenience store retailing play Alimentation Couche-Tard (TSX:ATD) are fresh off a spring-time correction. Undoubtedly, whenever you can buy wonderful earnings growth stocks that are down by double-digit percentage points on seemingly no material news, you may have a market bargain on your hands.
Indeed, the convenience store juggernaut faces yet another round of earnings up ahead. And I think the setup looks pretty good, with the stock now going for 18.5 times trailing price-to-earnings (P/E). That’s not the cheapest shares of ATD have gone over the past few years. That said, the company has been faring incredibly well amid inflation and could continue to thrive as inflation dies down and consumers are ready to give their spending a boost.
Understandably, convenience stores aren’t exactly the place to shop to get the absolute lowest price. For that, you’ll need to go to the big-box retailer, many of which are located in the suburbs or some remote area in the city. For many, the drive is simply not worth the savings unless, of course, you’re looking to do a big haul of bulk goods.
Either way, convenience stores represent a great middle-ground for consumers. And though it may not sell at the best prices, it does offer next-level convenience that’s tough to stack up against. When you compare time savings and convenience, perhaps well-run shops like Circle K offer a better bang.
Couche-Tard’s a king of convenience
Indeed, we’ve heard time and time again that time is money. With the company in the business of saving people time and removing friction from the checkout process, any savings on goods is a nice bonus. In a prior piece, I noted that Couche-Tard offered both convenience and value with its private-label brand.
Additionally, limited-time sales (think the two-for-one deal) and the loyalty app have also kept shoppers coming back, if not for the Polar Pop, for the great deals on snacks and the savings on a slew of private-label merchandise. Indeed, Couche-Tard’s strengths could accelerate once the economy starts taking off.
With solid margins and various investments in tech and modernization, I wouldn’t dare throw in the towel after the latest correction off highs. In fact, the dip may be a once-in-a-year sort of entry point for investors who may have missed the initial run. Even with the latest slip, the stock is up more than 43% in the past two years.
Bottom line on ATD stock
Though I have no idea if the same is in store for the next two years, I do like the growth plan, the valuation, the impressive cost optimization, and the long-term expansion runway. Further, as a well-run retailer of necessities, I find the firm more resilient in the face of macro headwinds.
All considered, ATD stock looks like a great deal ahead of earnings. And if earnings fall short of the estimates, the correction could steepen, and the opportunity to grow could become that much better.
