A “Convenient” Stock to Buy

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

A great company which has caught my attention lately is Casey’s General Stores (NASDAQ: CASY) which has been doing a great job in terms of performance. It recently posted its second quarter results which met analysts’ expectations, sending stock prices north.

Snapshot of an Effortful Quarter…

The convenience store operator made a number of efforts during the quarter which helped in  revenue growth of more than 7% to $1.91 billion. One of the key drivers of its top line increase was the addition of new stores. Casey expanded its presence largely through the acquisition of 3 stores and building 8 new stores from scratch. It has also been expanding into new areas. Further, its plans to open 30 new stores in the next one year highlight the growth potentials of the company.

Moreover, a number of operational strategies helped Casey grow even though it led to higher expenses. It has been remodeling its stores in order to make it even better and managed to remodel 51 stores during the quarter. Also, it has extended working hours for 150 stores which is a remarkable move since this is the uniqueness of its business model. Its addition of pizza delivery in more than 100 stores was also one of the operational efforts this time.

The prepared food segment has been the star performer, providing great sales coupled with the highest margins against other segments. The company plans to focus its efforts into this direction as demand for other merchandise such as cigarettes has been decreasing.

As Against Competitors

Casey looks attractive when compared to its industry peers such as The Pantry and Susser Holdings Corporation (NYSE: SUSS) as depicted by the chart below:

<img src="http://media.ycharts.com/charts/6a3d3539044cc8e23596edefa2fdb2b0.png" />

CASY data by YCharts

Considering the returns provided by the companies in the last 5 years, Casey looks like a clear winner. Its stock price has appreciated the most with more than 78% return to its investors.

Susser Holdings has also been a decent performer with a stock price appreciation of 46.4%. Though the company hasn’t been doing as well as Casey it had been making some great moves to outperform competitors. It had acquired Community Fuels of Texas sometime back in order to strengthen its position in the fuel segment. The acquisition added supply contracts to 121 dealer locations, making its wholesale segment even better. Additionally, it has partnered with Apache Corporation to offer natural gas at its stores. Hence, it has been trying to expand its product portfolio which might be fruitful in future.

Casey also faces competition from dollar stores such as Dollar General (NYSE: DG) which offers groceries at very attractive prices. Dollar General’s strategy of offering products for $10 has attracted customers galore to its stores, especially during the prevailing economic situation. Though Dollar General does not have additional facilities such as 24-hour service, its lowest prices is what lures customers to its stores for most part of the day. This is a cause of concern for the Casey’s General Stores.

The Takeaway

Casey has been taking the right strategic decisions at the right time. Its expansion into new areas and higher gasoline prices have been of great help. On the other hand, stiff competition from dollar stores in terms of price can be a deterrent to its growth. However, Casey’s prepared food segment and increasing pizza delivery network might help attract more customer attention. Also, it has been doing well as compared to its industry peers. Overall, Casey looks like a growing company and has bright future prospects. I don’t mind keeping an eye on this stock.

justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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