1 Undervalued Canadian retailer

Alimentation Couche-Tard has stayed low profile despite good financial performance

Alimentation Couche-Tard is a good business, but unfortunately has been bearing the brunt of a sideways market since the last 1 year.

S&P/TSX Composite Index is down 11% since March 2022, while $ATD is up about 16% in the same timeframe.

Alimentation Couche-Tard is a good business, but I feel it is undervalued right now.

How do I know its good?

1. Revenues have grown at a cagr of 7.5% since 2014

2. Gross margins have improved since 2014

3. Operating income and Net income have grown at a cagr of 17% since 2014

4. Average return on equity has stayed above 20% since 2014

5. Return on invested capital has stayed above 10% and has actually improved over the years

6. Operating cash flow has grown at a cagr of 13%, while free cash flow has grown at a cagr of 19%

7. Dividend per share has grown at a cagr of 25% in last 5 years

How do I know its undervalued?

1. The current market cap of $ATD is about $60B and the TTM revenues are $99B. This translates into a price/sales of 0.6

2. For a company growing profits in double digits and churning out ROE of 24%, the current EV/EBITDA stands below 10 and looks good

Recent Developments

1. Entered into a firm offer to acquire 2193 gas stations with convenience stores from TotalEnergies in Europe.

2. Entered a binding agreement for the acquisition of 45 fuel and convenience retail sites from Big Red Stores.

3. Entered into a binding agreement to acquire all of the membership interests of True Blue Car Wash LLC ("True Blue"). True Blue operates express tunnel car wash sites under the Clean Freak brand in the American Southwest as well as the Rainstorm brand in the American Midwest.

I have covered $ATD in more detail in this article:

An interesting global convenience store chain

Disclosure

I am long $ATD and its about 10% of my portfolio right now.

---

Thank you for reading this article! If you liked it please hit the LIKE button.

I hope you got some value out of this article. Please feel free to share this newsletter with your friends or family.

Disclaimer: Please do not consider this post as an investment advice. I am not a registered financial advisor. Nothing in this article should be construed as an investment advice. Please consult a registered financial advisor before making any investment decisions.

Credits: Most of the content of this article is public information that can be found on news articles, government and company websites.