Alimentation Couche-Tard Update: High Growth And Undervalued - 122% Upside

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  • The convenience industry is very fragmented which presents a great opportunity for large consolidators such as Alimentation Couche-Tard.
  • The company continues to post excellent financial results despite the pandemic.
  • Alimentation Couche-Tard is a great bet on two fast-growing industries: Cannabis and EVs.
  • Alimentation Couche-Tard has started its expansion into Asia and is also pursuing organic growth plans through new store builds and its "Fresh Food, Fast" program.
  • The high range of our valuation implies 122% upside, while our low range valuation still implies a respectable 60% upside.


Alimentation Couche-Tard (OTCPK:ANCUF) is a global leader of the recession-resilient gas station and convenience store industry. They have a solid balance sheet and a very consistent track record of creating value for shareholders. We believe the company will see tremendous growth despite its already massive size. Their acquisition strategy is exactly what is needed to trigger growth in its fragmented industry, but they are not reliant on acquisitions to grow as 50% of their growth will be organic going forward. With close to 15,000 stores, Couche-Tard has the economies of scale to give them a strong competitive advantage over their rivals. In addition, the company will further boost growth by tapping into the cannabis and EV markets. To top it all off, Couche-Tard is often overlooked by investors, which presents an opportunity to buy a very undervalued company that we think can return over 120% from current levels.

In September, we wrote a bullish article about Couche-Tard. Since no one has talked about them since then, we decided we'll write a follow-up article reassuring that our bullish thesis is still in play. We recommend reading our previous article here as it mentions an overview of the industry and some parts of their growth strategy in greater detail.

Alimentation Couche-Tard Logo

Looking into the most recent earnings report:

Although Couche-Tard saw a 22.1% revenue decrease YoY, the drop in revenue does not paint the picture correctly. You might think that a company that mainly operates gas stations would be struggling right now, but Couche-Tard is doing very well despite the pandemic.

  • Adjusted diluted EPS was $0.66, representing an increase of 32.0% from $0.50 in the same quarter last year.
  • Operating cash flow was actually down about 3.25% YoY, dropping to $880.8M from $910.5M last year. However, lower capital expenditures allowed free cash flow to increase by about 4.4%, to $606.9M from $581.4M
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This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Disclosure: I am/we are long ANCUF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are long its Canadian ticker ATD.B:TSX.

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