There aren’t that many truly “wonderful” businesses out there trading at reasonable prices. Though market valuations have stretched quite a bit since the start of the year, I view names like Alimentation Couche-Tard (TSX:ATD) as nothing short of compelling, even at a fresh all-time high. I’m strongly considering adding to my already sizeable Tax-Free Savings Account (TFSA) position at these levels.
Indeed, Couche-Tard blasted off nearly 2% during Thursday’s somewhat muted session of trade. At around $69 per share, the stock is at new heights. And I think even higher highs could be in the cards as we head into the second half.
Undoubtedly, recession headwinds have rattled many TFSA investors, causing some to ditch growth for value. With growth in relief mode, and value taking a backseat again, questions linger as to what the second half of 2023 could hold. Either way, I think Couche-Tard has demonstrated its earnings resilience. It’s been through an inflation storm and macro setbacks, only to blow away the analyst estimates.
Couche-Tard stock: The closest thing to perfection in my portfolio
Though it’s tough to label any investment as “perfect,” I think Couche-Tard is pretty close to it, especially in today’s rocky and volatile environment. If you look at the three-year chart, it’s hard not to love the stock. Shares have risen in a steady upward fashion. While there have been occasional bumps in the road, the trend is clear: higher highs. Better yet, the stock rally hasn’t really caused the price-to-earnings (P/E) multiple to swell.
There are two metrics that go into the widely followed P/E ratio: price and earnings. As a stock price moves higher, earnings will need to rise accordingly to keep the P/E ratio from swelling. If earnings growth outpaces the pace of stock appreciation, you could have a bit of compression on that ratio.
When it comes to Couche-Tard stock, earnings and price appreciation have been on the same page. That’s a major reason why the stock’s P/E ratio (currently 17.1 times trailing) isn’t that much more expensive than its five-year historical average of around 16.3 times.
As the Canadian economy finds its footing again, I’d look for earnings to keep going strong, all while the brilliant management team considers the broad range of merger and acquisition opportunities it could take advantage of with its impressive liquidity position.
Couche-Tard’s strong liquidity position could help it seize opportunities
The current ratio is an impressive 1.1, and the stock has a modest 0.75 debt-to-equity ratio. Indeed, there’s room for more deals. And I think that’s what we’ll get over the next three years.
Couche is in solid financial health, and its earnings have the means to lay the groundwork for further gains in the stock. Sure, no company is “perfect,” but it’s tough to find a TSX stock that’s as impressive as Couche-Tard at these levels. Over the past three years, the company has averaged 10.4% in operating income growth. That’s impressive for a company going for less than 20 times P/E!
Further, even a “perfect” company can cause one’s TFSA to lose money if the price isn’t also in the right spot! Fortunately, I think ATD stock is still undervalued at just shy of $70.
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 29 percentage points.*
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
