Alimentation Couche-Tard Inc.'s (TSE:ATD) Has Had A Decent Run On The Stock market: Are Fundamentals In The Driver's Seat?

Alimentation Couche-Tard's (TSE:ATD) stock up by 1.2% over the past month. As most would know, long-term fundamentals have a strong correlation with market price movements, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. In this article, we decided to focus on Alimentation Couche-Tard's ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Is ROE Calculated?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Alimentation Couche-Tard is:

16% = US$2.6b ÷ US$16b (Based on the trailing twelve months to July 2025).

The 'return' is the income the business earned over the last year. So, this means that for every CA$1 of its shareholder's investments, the company generates a profit of CA$0.16.

View our latest analysis for Alimentation Couche-Tard

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

Alimentation Couche-Tard's Earnings Growth And 16% ROE

To begin with, Alimentation Couche-Tard seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 15%. However, we are curious as to how Alimentation Couche-Tard's decent returns still resulted in flat growth for Alimentation Couche-Tard in the past five years. We reckon that there could be some other factors at play here that's limiting the company's growth. These include low earnings retention or poor allocation of capital.

Next, on comparing with the industry net income growth, we found that the industry grew its earnings by 2.8% over the last few years.TSX:ATD Past Earnings Growth October 29th 2025

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Has the market priced in the future outlook for ATD? You can find out in our latest intrinsic value infographic research report.

Story Continues

Is Alimentation Couche-Tard Using Its Retained Earnings Effectively?

Alimentation Couche-Tard's low three-year median payout ratio of 16% (implying that the company keeps84% of its income) should mean that the company is retaining most of its earnings to fuel its growth and this should be reflected in its growth number, but that's not the case.

Moreover, Alimentation Couche-Tard has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 17% of its profits over the next three years. Accordingly, forecasts suggest that Alimentation Couche-Tard's future ROE will be 19% which is again, similar to the current ROE.

Conclusion

In total, it does look like Alimentation Couche-Tard has some positive aspects to its business. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return and is reinvesting ma huge portion of its profits. By the looks of it, there could be some other factors, not necessarily in control of the business, that's preventing growth. With that said, we studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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