Casey’s Department Stores NASDAQ: CASEY is on track for a stock split that could happen in 2025 as its share price, up more than 525% over the last decade, is only heading higher, putting it out of reach for “average” investors. What does it mean? High-quality businesses such as Casey’s General Stores typically prefer their stock prices to trade at a level at which average investors, including their employees, can afford to buy shares regularly. When the price gets too high, it is time to split.
Casey’s Department Stores Today
Casey’s Department Stores
(As of 12/13/2024 5:27 PM ET)
- 52 week range
- $266.58
▼
$439.68
- Dividend yield
- 0.47%
- P/E ratio
- 29.64
- Target price
- $419.45
Assuming that the average investor can’t spend thousands of dollars a month to buy just two or three shares, Casey’s General Stores stock price is entering stock split territory. It is trading above $425 and moving higher thanks to self-funded growth, strong profitability and return on equity.
Similar Dividend Increasing Companies Like Cintas NASDAQ:CTAS set a precedent by splitting their shares 4:1 earlier in 2024. Although it’s been many years, Casey’s stock has split in the past, so the precedent is strong, but it doesn’t really matter. Casey’s is a high-quality compounder that is growing its business, capital allocation and shareholder value; this stock will trend higher with or without a stock split.
Casey’s second quarter results show sustained strength supporting share price gains
Casey’s reported a mixed second-quarter report compared to MarketBeat’s consensus forecast, but that didn’t make it any less good. The company’s revenue declined due to lower prices for gallons of fuel sold and sold, but the weakness was minor and offset by strength in other areas. Important details include 4% domestic return, 7.1% in a two-year portfolio and wider margins.
Domestic sales were driven by food and beverage sales, including hot sandwiches and cold beverages. Internal margins increased 110 basis points and contributed to leveraged net income growth despite lower net revenues. Fuel sales, a larger segment that accounts for more than 60% of the business, fell 0.6% and provided narrower margins, but still high at more than $0.40 per gallon and not enough to offset higher domestic sales.
Casey’s General Stores MarketRank™ Stock Analysis
- Overall MarketRank™
- 91st percentile
- Analyst rating
- Moderate purchase
- Pros/Cons
- 1.4% Minus
- Short interest level
- Bearish
- Dividend Power
- Strong
- Environmental assessment
- -2.70
- Mood News
- 0.80
- Insider trading
- Sale of shares
- Project Profit Growth
- 10.71%
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Margins and cash flow are among Casey’s strengths. The retailer’s EBITDA margin is around 10% and provides healthy cash flow, balance sheet and return on capital. The net result for the second quarter was $4.85 on a GAAP basis, up 14% from a decline in revenue, driven by internal efficiencies and share repurchases. The company did not repurchase shares in the second quarter due to the Fikes acquisition, but activity since the end of the second quarter of F2024 has gradually reduced the number of shares for the quarter. Buyouts are likely to resume soon with $295 million in clearance still in effect and the Fikes deal closed. It is expected to grow by the fourth quarter.
Casey’s positive cash flow supports growth and return on capital
Casey’s balance sheet shows some changes, but they are all good. The company delivered consistently positive quarterly cash flow, suspending share buybacks and positioning itself to strengthen now that the Fikes deal has closed. Highlights include increases in cash, accounts receivable and long-lived assets, only partially offset by increases in liabilities. Equity is up 10% and leverage is very low despite increasing debt, which is approximately 0.75x equity. This gives the company the opportunity to continue investing in its growth and possibly resume share repurchases as early as the current quarter.
Analysts reacted positively to the news. MarketBeat is tracking several post-release changes that are consistent with trends. Trends include increased coverage, stronger sentiment and higher price targets. All post-launch changes have increased price targets, leaving the market averaging nearly $450 over the next 12 months. This exceeds consensus and takes the market to new highs. A stock split isn’t guaranteed, but the price action is suggestive and could prompt Casey’s board to take action sometime next year.
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