Casey's General Stores Inc "CPG = Consistent Profit Growth" (Neutral) Carden

Research evidence excerpt

Casey's General Stores Inc "CPG = Consistent Profit Growth" (Neutral) Carden

Casey's General Stores Inc UBS Research

Casey's is currently trading at ~43x NTM consensus EPS. To arrive at our price target of

$945, we now apply ~41x our NTM EPS estimate, 12 months out, of $23.18. This puts it

midway between WMT's ~39x valuation and COST's ~43x (NTM P/E basis), which we

believe are appropriate comparisons given their consistent earnings growth profiles.

Casey's has an established track record of growing EPS through consistent inside SSS

and new store unit growth. This has translated into a ~16% EPS CAGR over the past 3

years (higher than both WMT & COST). We think the company is well positioned to

continue these trends as CASY has substantial white space opportunity to support

further organic growth initiatives, justifying our elevated valuation multiple.

We think it is useful to examine how our valuation would respond to various changes in

our assumptions for CASY's earnings outlook over the next few years and the valuation

multiples that would be associated with those scenarios. The following figure highlights

our base case, upside case, and downside case.

Figure 1: CASY Valuation Sensitivity Analysis

tion Sen nalysis

CASY Va lua y A

sitivit

Source: Company reports, UBS estimates

We show Casey's valuation relative to two subsets of peers: North American c-stores

and high quality retailers. We believe Casey's should be valued more in line with high

quality, earnings compounders like COST and WMT. On a NTM P/E basis, CASY trades at

43x, which is more than twice as high as ATD and MUSA. However, CASY trades much

more in line with the valuations of COST and WMT. We believe the consistency of

CASY's earnings growth is a key driver behind its valuation premium. We believe the