After reading through your try out positions I was surprised to see CASY make it to your list. I picked up CASY in the Springtime and recently sold it for cash at the beginning of the month. My rationale for the sale: Although the EPS growth looked really good, I was concerned by flat revenues. I thought internal and operational improvements to juice EPS growth would only go so far and would eventually have to taper off. If there were more signs of revenue growth, however, it would be a trigger for me to get back in. I decided to sell and keep watch on it.
I’m curious to hear your thoughts and rationale in selecting it for your portfolio (if you wouldn’t mind sharing). I would be happy to learn I made a mistake or overlooked something. I also noticed it is trading about where I sold it about a month ago, which means passed through the recent market turmoil relatively unscathed. A show of strength through a down market is a nice quality for ownership - perhaps worthy of another look for that reason alone.
There was a good discussion about this on the CASY board by TMF1000 and a few others. The primary reason why revenue is down/flat is because the price of gas has fallen so much. When the gas prices fall like they have, operations like CASY will obviously take in less dough but, ironically, the margin on the gas they do sell rises as the price goes down.
Rather than looking at overall revenues, what needs to be looked at in this situation is their revenue on in-store sales. If I remember correctly, these revenues continue to rise at a good clip. Hope this helps.
Another thing that just completely blew me away about CASY that I learned recently: They are the country’s fifth largest pizza seller! And they only operate in a handful of states!
I have been contemplating CASY for a while. Saul’s endorsement in it gives me that much more confidence. This might be the next position I open.
I believe their non-fuel revenue grew 14% in the most recent quarter, which is not too bad. They also own most properties they occupy in. Appreciation is probably not reflected on their balance sheet? Feels like a company you can own for a long time without worrying too much.
Thank you Matt and Mac. I did not know about the gas factor and the flat revenue now makes a lot more sense.
However, with 14% for everything else (non-gas), is that really a lot? I mean, yes it is very good for a TMF rec, but isn’t the typical Saul stock somewhere north of 20% for revenue growth? Could there be something else?
My rationale for the sale: Although the EPS growth looked really good, I was concerned by flat revenues. I thought internal and operational improvements to juice EPS growth would only go so far and would eventually have to taper off. If there were more signs of revenue growth, however, it would be a trigger for me to get back in. I decided to sell and keep watch on it.
Revenue growth includes gas prices, so with the price of gas falling, revenues are obviously going to fall. And actually, they tend to be more profitable when gas prices are low because people aren’t as price sensitive.
But gas has very little to do with the future profit opportunities with this business - look at the growth of their food business. SSS growth of 10%+ and huge margins on that side of the business. That’s where the money will be made with this company. CASY is now one of my largest holdings and I think it can easily triple over the next five years.
Saul, After reading through your try out positions I was surprised to see CASY make it to your list. I picked up CASY in the Springtime and recently sold it for cash at the beginning of the month. My rationale for the sale: Although the EPS growth looked really good, I was concerned by flat revenues. I thought internal and operational improvements to juice EPS growth would only go so far and would eventually have to taper off. If there were more signs of revenue growth, however, it would be a trigger for me to get back in. I decided to sell and keep watch on it.
I’m curious to hear your thoughts and rationale in selecting it for your portfolio (if you wouldn’t mind sharing). I would be happy to learn I made a mistake or overlooked something. I also noticed it is trading about where I sold it about a month ago, which means passed through the recent market turmoil relatively unscathed. A show of strength through a down market is a nice quality for ownership - perhaps worthy of another look for that reason alone. Best,–Kevin
Hi Kevin, With CASY, revenue is deceptive. I’m talking off memory here, but as I remember it, fuel is about 70% of their revenue but has only about a 7% margin. On the other hand they have 60% plus margins on their prepared foods (pizza, etc) and 30% margins on groceries, etc. Low fuel prices mean lower total revenue, but more total gallons sold, and higher traffic in the stores, and more sales of the high margin stuff. Paradoxically, with low fuel prices they even have a higher margin on gasoline. (For example, if they mark it up 17 cents a gallon, that 17 cents is a higher percent at $2.50 gas than at $3.50 gas, etc, and more gallons sold mean more 17 centses).
Thank you Matt and Mac. I did not know about the gas factor and the flat revenue now makes a lot more sense.
However, with 14% for everything else (non-gas), is that really a lot? I mean, yes it is very good for a TMF rec, but isn’t the typical Saul stock somewhere north of 20% for revenue growth? Could there be something else?
Kevin,
I remember reading about CASY converting more stores to 24hr format, expanding their food offering, and testing food delivery service, along side adding online food ordering. Those are on top of new store openings. So this part is the “potential” part that’s technically unproven, but probability of success is relatively high.
On a side note, I just had a thought the other day. When the day of driver less cars arrive, and they come up with a good way to get food delivered, that would mean big business increase for restaurants… and TSLA, so I decided to buy a bit more TSLA soon.
Would anyone help me on PEG ratio for CASY? I am thinking if it has low PEG like some other Saul stocks (with its growth rate not like some other Saul’s stock).
From my own derived data (most recent Q is at the left … backwards from Kevin’s spreadsheet and someday I need to reverse them for consistency). Last 3 numbers are P/E, YoY EPS growth, and 1YPEG:
