Tuesday, August 21, 2012

Alimentation Couche-Tard Inc. 2

I own this stock of Alimentation Couche-Tard Inc. (TSX-ATD.B). I bought this stock in 2004 and some more in 2006 and 2007. I have made a return of 17.26% per year total return on this stock. Dividends are very low and the portion of this total return attributable to dividends is just 0.51%. The rest, 16.75% is attributable to capital gains.

There is lots of insider selling as is usual with the stock. There is $61.8M of insider selling and net insider selling at $61.7M. Mainly it is insiders cashing in their options. Also, there is some $10M of insider selling by CEO who is gifting some shares. Besides options they have Phantom Stock Units and Deferred Share Unit Plan.

Most insiders have more options or options like things than shares, but there is some heavy insider ownership also, but this in in the Class A multiple voting shares. Also Metro Inc. (TSX-MRU.A) owns almost 28% of the Class A multiple voting shares of this company. The company buys shares on the open market that covers what they give out in options.

Also, in July 2012 the company announced an equity issue on a bought-deal basis of 6.35M Class B shares at price of $47.25 CDN$. I have changed the shares outstanding on my spreadsheet to reflect this. There seems to be very little institutional ownership of this stock (less than 2%). (However, note Metro's shares above.)

I get 5 year low, median and high Price/Earnings Ratios of 9.48, 12.00 and 14.52. I get a current P/E Ratio of 15.15. This P/E ratio shows that the current stock price of $49.07 stock price is a bit high. (Bought deal at $47.25 gives a P/E 14.59. This shows that the bought deal price was also relatively high.)

I get a Graham Price of $29.14. The 10 year low, median and high Price/Graham Price Ratios are 1.12, 1.55 and 1.88. The current P/GP Ratio is 1.68 shows a rather reasonable, if a little high, stock price at $49.07. (Bought deal at $47.25 gives a P/GP ratio of 1.62. Not far off the current P/GP ratio.)

I get a 10 year median Price/Book Value Ratio of 2.88. The current P/B Ratio is 4.21, a value some 46% above the 10 year median P/B Ratio. This shows a relatively high stock price. (The bought deal price of $47.25 has a P/B Ratio of 4.06. This P/B Ratio is 41% above the 10 year median P/B Ratio and therefore a rather high relative price.)

I get a 5 year median dividend yield of 0.81%. The current yield is 0.61%, a yield some 24% lower. This also points to a high price. This yield is even lower than the 10 year median low dividend yield of 0.64%. (The bought deal stock price of $47.25 gives a dividend yield of 0.63%. This yield is some 21% lower than the 5 year median dividend yield. It is also a bit lower than the 10 year median low dividend yield.)

Except for the Graham price test, the current stock price of $49.07 is showing as a relatively high stock price. The recent bought deal stock price of $47.25 is also showing as relatively high price on most tests. (However, just because there is bought deal does not mean that they paid a good price.)

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The vast majority of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month consensus stock price is $59.00. This implies and 12 month total return of 20.8%, with some 20.2% from capital gains.

I think that the stock price is relatively high for this stock. However, it appears that lots of analysts think otherwise. One analyst thought although the current debt ratios are a bit low, the company did not go the market because of this, but to reload their balance sheet well in advance of their next transaction. The thought is they are going to be going after assets in Europe.

Some analysts with Buy recommendations comment that the management of the company has done a very good job. Another thinks that they have a great model with convenience stores next to gas stations. One analyst with a Don't Buy recommendation says that he does not like the fact that they get a lot of their money selling tobacco products and therefore would not buy the stock.

Personally, I think it is a great company and I will hold on to my shares. I believe that the stock price is high, but not unreasonably high.

This stock is a recent pick of Michael Smedley who is the executive vice-president of Morgan Meighen & Associates. See article. The globe talks about consumer stocks, including this one, as being currently hot. See article. You can learn all about the company and its history at Wikipedia. There is also a long article on this company at CPS Net.

In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum company or not) in terms of number of company-operated stores. Its stores offer a broad mix of food products, beverages, other merchandise and services and motor fuel. Grouped under three main brands: Couche-Tard, Mac's and Circle K. Stores are located across 10 Provinces of Canada in three geographic markets (East, Centre and West), and across 43 American states and the District of Columbia in eight major markets (Great Lakes, Midwest, Southeast, Florida, Gulf, Arizona, West Coast and Southwest). In addition, a network of about 3,700 licensees extends in seven other regions worldwide (China, Guam, Hong Kong, Indonesia, Japan, Macau and Mexico). Its web site is here Couche-Tard. See my spreadsheet at atd.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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