One of the growth plays on the TSX I’ve liked the most in recent years, due primarily to its relatively low valuation, has been Alimentation Couche-Tard (TSX:ATD.B). This company is in the convenience store and gas station business, a sector which does not typically deserve a premium valuation. This is an "unsexy" business, at a time when driving is depressed and a lack of tailwinds in this sector exists.
This is precisely why I like this stock right now. Couche-Tard is in the business of acquiring its way to growth. This environment is conducive to acquisition-based growth companies like Couche-Tard accelerating its growth over time via picking up well-priced acquisitions right now, with an environment that is very favorable to acquirers right now.
The cost of acquisition financing hasn’t been this low in a long time. Given the strength of Couche-Tard’s balance sheet and the significant amount of room the company has to engage in additional acquisitions in the future, I think this bodes well for this value pick right now.
A recently announced acquisition which has been talked about heavily of late is between Couche-Tard and French retailer Carrefour. The merger would be the second largest foreign acquisition by a Canadian company, valued currently at around $35 billion U.S.
Whether or not this deal goes through remains to be seen, as this deal would require French government sign off, given its size. That said, I do think this deal evokes the appetite Couche-Tard has for deals, and why I think this could be the most undervalued growth play on the TSX right now.
Invest wisely, my friends.
