CA - Alimentation Couche-Tard: Long Term Compounder We Think Will Generate Outsized Returns Going Forward

2024-03-15 17:13:50 ET

Summary

• ATD’s revenue generation has been incredibly consistent, with a combination of organic growth and M&A. Management has a solid pipeline and considerable room to expand.
• The company’s expansion strategy is impressive, delivering a perfectly resilient ROE during the last decade. Whilst analysts see margin improvement, we are bullish on growth alone.
• While its industry is slow-moving and mature, ATD has numerous growth levers from which to maximize its returns, namely expanding its food offering and expanding globally.
• ATD is outperforming its peers on a margin basis while broadly matching growth, reflecting its strong competitive position but the ability to still gain market share.
• ATD is unlikely to ever trade at a discount but is yielding ~6%. This is its decade average, at a time when it returned over 450%, and so we see upside at its fair value.

Introduction and thesis

Alimentation Couche-Tard ( ATD:CA ) ( ANCTF ) is a multinational convenience store and fuel retailer headquartered in Laval, Quebec, Canada. Founded in 1980, the company operates a network of convenience stores, gas stations, and car wash facilities across North America, Europe, and Asia-Pacific. Couche-Tard's brands include Circle K, Ingo, and Couche-Tard, among others, serving millions of customers daily.

ATD is one of the highest-quality compounders we have come across. The company is not overly complicated and while its strategy is detailed, it is not exactly rocket science. The company is delivering value through a combination of scale-at-all-costs and doing slightly better each day....

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