CASY

Publicly traded companies mentioned herein: Casey’s General Stores Inc (CASY)

Highlights

The presenter is long shares of Casey’s General Stores Inc (CASY), which currently trades at ~$175 per share and has a market cap and enterprise value of ~$6.5B and ~$7.5B, respectively. CASY’s FY2021 ends April 30th, 2021, and the stock is up LDD% since the end of FY2020 despite stronger EBITDA growth, meaning that its multiple has compressed slightly to ~10x EBITDA. Over a multi-year horizon, the presenter views CASY as a defensive compounder given its opportunities for growth (e.g., organic box expansion and M&A), modernization on both the consumer and corporate sides, and private label expansion. He is confident that CASY’s strong management team will fund these initiatives to drive improved returns and grow its asset base, and therefore applies a ~12x EBITDA multiple to reach his ~$300 share price target three years out. Over the shorter term, he thinks the Street’s concern that CASY will be lapping high fuel margins is overstated and expects the company to outperform the consensus NTM EPS estimate of $8.20 by ~20%. Applying a 22x EPS multiple to this outlook yields a near-term price target of $210 – $220.