Couche-Tard is updated and remains rated Buy, now at $60.25
I have been following this company since it was added to this site rated (lower) Strong Buy at $5.80 (split adjusted) on March 31, 2005. The gain has been 939%. It would have made a great buy and hold forever stock. At times it has looked too expensive but in fact its subsequent growth has always justified the price. The achievements of this once tiny Canadian company are truly staggering. Just in the years I have been watching, it has gone from (I believe) roughly 5,000 stores to roughly 13,000. And they still have the acquisition pedal to the floor!
The stock price has been relatively stagnant in the past two years. Now, based on recent large acquisitions that have taken its assets to $20.1 billion in Q1 from $14.2 billion in Q4 and $12.3 billion just 15 months ago, it appears poised for another very significant jump in revenues and earnings per share. In 2012 through 2014 it got a major boost from a very large European acquisition (the boost in revenues was immediate upon closing the deal but some of the boost in earnings was achieved only after cost-cutting moves). These recent large acquisitions may not be as lucrative as the European acquisitions but will almost certainly deliver significant earnings gains over the next couple of years.
Offsetting this somewhat is the higher Canadian dollar that reduces earnings when translated to Canadian dollars though it (paradoxically) increases reported earnings in U.S. dollars. There is also a near-term headwind in terms of damage to stores from the two recent hurricanes.
I am confident in buying or holding this company but I would also be prepared to buy more on a possible dip related to the above factors. Its margins on fuel sales can also be volatile which can lead to better buying opportunities sometimes.
On my just completed road trip from Cape Breton Nova Scotia to Edmonton I certainly found myself attracted to stop at the largest and brightest and cleanest of “gas stations”. The stations that have a large convenience store as well as a Subway or Tim Hortons are highly convenient. Couche-Tard runs many stations like that. And there is certainly room to add more or convert existing gas stations to this larger format.
It may be very simplistic and boring to look to this simple retail business as an investment. But I believe it will continue to do well. And this is a business that all investors can understand. An added benefit of buying these shares is a certain satisfaction that will come from shopping their stores as an owner.
And note that this is now a HUGE company. Its revenues are now running at $48 billion annually and poised to increase. Report on Business Magazine ranks it ninth largest company by revenue in Canada. But due to its April 30 year end that was based on revenues nearly a year old. Manulife had the highest revenue at $53.5 billion. It looks to me like Couche-Tard could possibly make a run to the top spot in the next few years. In terms of net profit, Couche-Tard ranked 19th highest in Canada. It had only 15% of the profits of number one, Royal Bank. But still being the 19th most profitable company in Canada might shock a lot of people.