CASY and the future of 1yr peg

This post concerns the future of the 1 year peg ratio after the next couple of quarterly earnings.									
The 1 year peg ratio will jump dramatically if analyst projections are accurate.									
I know this board doesn't put much credence in forecasts (and for good reason), but i think in this case they are at least worth looking at, especially in what they could mean for the buy/sell triggers, specifically the 1 year peg ratio and ttm earnings deceleration.									
Current ttm 1 year peg:  p/e is 21.2 (as reported, not adjusted)						 			
Here's what happens to the peg if forecasts are accurate:									
	21.18126273						growth	1 yr peg	
 	 	 	after 7/15:		4.91	3.15	56%	0.38	
	 		after 10/15:		5.00	3.42	46%	0.46	
	 		after 1/16:		4.76	4.10	16%	1.32	
Earnings forecasts are quite difficult with this company given the volatility in gas prices and the high degree of operating leverage.									
What caught my eye is the low forecasted growth rate for the coming quarter (1.37 vs. 1.28), and the large down eps in the Jan quarter (77c vs. 1.01).  									
Looking at the income statement comparing the Jan 2015 quarter and the Jan 2014 quarter, the positive leverage from decreasing fuel prices is striking.  Note lower fuel prices hurt revenues, but actually help gross profits, so gross margins jumped dramatically.  									
In the Fuel segment, average margin was 22 cents per gal, compared to a goal of 15.3 cents for FY 2015.  									
I don't know what analysts are using for fuel margin for the upcoming quarters, but it sure looks like they are using a much lower number than last year's actual.  									
I'm still learning about this company, and for now find it very attractive for long-term growth, but I am concerned that those using the 1 year peg metric could get whipsawed given the volatility in quarterly earnings.
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I don’t think your future EPS growth numbers are reliable. If they were,
then it means that the company temporarily makes a ton of money due
to some fleeting circumstances that are going to quickly vanish.

I have not heard anything that even come close to support the notion that
current earnings growth is a bubble that will soon pop.

However, I do believe your past numbers as in 56% growth for the TTM
ending in 7/15.

That raises an interesting question. How does a company that expands store
base at a 5% annual pace with Same-Store-Sales growth of, say, 5%, generate 56% growth in EPS? I don’t doubt it, I’m just curious if somebody dug into the numbers and can explain this(?)

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How does a company that expands store
base at a 5% annual pace with Same-Store-Sales growth of, say, 5%, generate 56% growth in EPS?

The sales growth is a gross figure. EPS is a net figure. A small difference in profit percentage can make a big difference in the amount of profit and hence in EPS.

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I don’t think your future EPS growth numbers are reliable. If they were,
then it means that the company temporarily makes a ton of money due
to some fleeting circumstances that are going to quickly vanish.

I have not heard anything that even come close to support the notion that
current earnings growth is a bubble that will soon pop.

Those aren’t my numbers, those are the consensus forecast eps for the next two quarters.

And the point of my post was that it looks like quarterly earnings can be quite volatile, and that is going to make the 1 yr peg unreliable. Note that 1q15 eps was $1.01 vs. 1q14 eps of 33c. On down revenues. The primary reason was dramatically higher fuel margins, way above the company’s own goal. This is unsustainable. The forecast for this Jan is 77c. The two year growth rate for just the Jan qtr (1q16 vs. 1q14) is more than a double. Quite impressive. But the growth rate vs. last year is down significantly. Therefore a 1 yr peg metric will look bad once the Jan qtr is announced.

My other point is that current earnings are not a bubble, but volatile enough that some may view them as a “popping bubble” given the very tough comparison. On the one hand, I suspect the stock price may be contained until we pass these tough comparisons; on the other hand, the company has been beating expectations handily and I see no reason it won’t continue.

To reiterate my initial conclusion, I like the company long-term very much, but users of the 1-yr peg should be cautious in this instance.

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