Should You Investigate Alimentation Couche-Tard Inc. (TSE:ATD) At CA$78.97?

Let's talk about the popular Alimentation Couche-Tard Inc. (TSE:ATD). The company's shares saw significant share price movement during recent months on the TSX, rising to highs of CA$85.11 and falling to the lows of CA$75.90. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Alimentation Couche-Tard's current trading price of CA$78.97 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Alimentation Couche-Tard’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Alimentation Couche-Tard

What Is Alimentation Couche-Tard Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 20.53x is currently trading slightly above its industry peers’ ratio of 20.1x, which means if you buy Alimentation Couche-Tard today, you’d be paying a relatively sensible price for it. And if you believe that Alimentation Couche-Tard should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Alimentation Couche-Tard’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Alimentation Couche-Tard look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Alimentation Couche-Tard's earnings over the next few years are expected to increase by 30%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ATD’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ATD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on ATD, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ATD, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Alimentation Couche-Tard has 1 warning sign we think you should be aware of.

If you are no longer interested in Alimentation Couche-Tard, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.