Tuesday, May 10, 2022

A Small-Cap Equity holding: Casey’s General Stores (CASY, $201.30): “Pizza and Gas, an Unlikely Combination” By: Max Tiemann, AIM Student at Marquette University

Casey’s General Stores (CASY, $201.30): “Pizza and Gas, an Unlikely Combination”

By: Max Tiemann, AIM Student at Marquette University

Disclosure: The AIM Small-Cap Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.


  • Casey’s General Stores Inc. (NASDAQ: CASY) operates gas stations and convenience stores across the US Midwest region. The company operates through a fuel segment (55% of revenue), a grocery and other merchandise segment (31%), a prepared food and fountain segment (13%), and an other segment (1%).
  • The Covid-19 pandemic forced the company lose revenue as less people were on the roads which decreased fuel sales and foot traffic.
  • To combat the pandemic, management has been extremely focused on their growth strategy to earn 8-10% EBITDA growth year over year.
  • Growth strategies include acquiring more stores, a digital app, Casey’s branded products, and partnerships with UberEats and DoorDash

Key points: Ever since Darren Rebelez took over as CEO, Casey’s has aimed to have 8-10% EBITDA growth year over year. This growth is needed due to the revenue lost from the Covid-19 pandemic. To achieve this high growth the company has implemented a variety of strategy to ultimately increase earnings for shareholders.

The first growth strategy that Casey’s has implemented is store growth and acquisitions. Since 2010, the company has increased stores by a 4.37% CAGR and currently operates over 2,458 stores. Casey’s increases their stores by either new store builds or through acquisitions. This past year the company acquired 178 stores from other gas stations.

The next growth strategy that Casey’s has implemented is partnering with UberEats and DoorDash. This partnership allows the company to earn revenue from digital orders and ultimately target a different customer base.

Another growth strategy that Casey’s has implemented is introducing a digital app and their own brand. With over 4.2 million people on the Casey’s app, the company has been able to earn revenue from digital sales of grocery and prepared foods. On top of that Casey’s introduced their own brand that allows them to increase their gross margin by having a lower cost of goods sold on their branded foods.

By combining all these strategies, Casey’s aims to earn 8-10% EBITDA growth over the coming years.

What has the stock done lately?

Over the past six months, CASY is up 4.39%. This increase can be attributed to management’s growth strategy of acquisitions and adding more stores to increase earnings. Over the past month, CASY is up 0.61% but over the past five days the stock is down 4.52%. This displays that recently CASY has had success and their returns may be skewed from a difficult week.

Past Year Performance: Over the past year, CASY is down 9.74%. However, this decrease primarily came in the beginning of the year. Over the past six months CASY is up 4.39%, displaying that management’s growth strategy has been effective in increasing earnings and the share price.

Source: FactSet

My Takeaway

I believe that Casey’s General Stores growth strategy will prove to be successful. By combining the strategies of unit growth, digital sales, and their own brand, I think the company will be able to grow their EBITDA and ultimately increase EPS. On top of that, I think the Covid-19 pandemic forced Casey’s to miss out on a ton of foot traffic which ultimately decreased revenue and their share price. As the world finally returns to normalcy, I believe the stock price should continue to increase.

Source: FactSet