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Better Buy: Couche-Tard Stock or Parkland Fuel Stock?

gas station, convenience store, gas pumps
Image source: Getty Images

Written by Joey Frenette at The Motley Fool Canada

It’s the battle of the convenience retailers in this piece, as Alimentation Couche-Tard (TSX:ATD) and Parkland Fuel (TSX:PKI) go head to head. This battle could hold more value for the year ahead. Though consumers have felt pressure points this year, it’s quite notable that both retailers have continued to post promising results. At writing, shares of Couche-Tard and Parkland Fuel are up 30% and 54%, year to date, respectively. As we move into a new year, I think shares of both gas station and convenience retail plays have much more room to run.

Undoubtedly, their earnings growth profiles are attractive at a time like this, when rates are high, and investors demand actual profits over growth promises. Though the business of gas stations is in for some pretty drastic changes over the coming decade, as electric vehicles (EVs) become more prevalent across the continent, I would not count either firm out of the game as it continues to evolve.

Additionally, it’s not just about catering to new vehicle types. Consumer wants are changing all the time, and both firms appear to be ready to step up to the plate. Whether we’re talking about Parkland Fuel and its purchase of M&M Food Market (to bolster that frozen food section) or Couche-Tard’s fresh food offerings, it’s clear that convenience stores are well-equipped to keep beckoning in shoppers, even the ones that don’t need to fill up their gas tanks.

Which stock is the better pick-up going into 2024? Let’s find out!

Couche-Tard

Couche-Tard stock is on the mend after a slight drop after the latest quarterly earnings report. The numbers themselves weren’t bad, but clearly, investors wanted a bigger upside surprise. Looking forward, I do think they will get one in due time as consumers look to spend more at the local Circle K.

Though recent performance has been applaud-worthy, it’s the five-year strategy that should have long-term investors hyped. The company is sure to be active on the acquisition front in that time span. And with that should come more steady earnings growth. Indeed, the $75.4 billion retailing giant is getting bigger, but it’s not about to run out of gas when it comes to its growth.

At 18.5 times trailing price-to-earnings (P/E), I view Couche-Tard as one of the bluest blue chips that money can buy! Additionally, there’s a 0.77%-yielding dividend that could grow by a great deal over the next five years as the firm executes on its growth plan!

Parkland Fuel

Parkland Fuel trades at 17.6 times trailing P/E, a tad lower than Couche-Tard. With a 3.04% dividend yield, it’s also the more bountiful play. As the stock continues recovering from its multi-year funk, investors may wish to nibble away at the $7.8 billion gas station gem on the way up.

Going into 2024, expect performance to recover further. And though I pointed out that Parkland would have made a great target for Couche-Tard, when it was trading at much lower multiples, I’m not so sure the price is right for such a merger anymore. Parkland has really turned a corner and could be destined for new all-time highs by next year’s end.

Better buy: PKI or ATD stock?

I like Couche-Tard stock more here, given its steadier trajectory and impressive managers. Though Parkland has seemingly turned a corner, with a slightly lower price and far richer dividend yield, I must say that Couche-Tard sets a really high bar when it comes to growth in the convenience retail space. Further, I’m much more bullish on the company’s prospects as it steers into the EV age.

The post Better Buy: Couche-Tard Stock or Parkland Fuel Stock? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Alimentation Couche-Tard?

Before you consider Alimentation Couche-Tard, you'll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and Alimentation Couche-Tard wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 11/14/23

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Fool contributor Joey Frenette has positions in Alimentation Couche-Tard. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

2023