➡️ This is a step-by-step stock review to determine if Casey’s (CASY) stock is a good buy. In this article, we’ll help you complete a 4M Confidence Booster. The 4Ms include the MOS (Margin of Safety), Meaning, Moat, and Management.
Table of Contents
➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
Casey’s Company History:
- 1959: Casey’s General Stores was founded by Don Lamberti in Des Moines, Iowa. He opened the first store with the name “Casey’s” after noticing that his local gas station closed early, leaving him without a place to buy necessities.
- 1968: The company expanded beyond a single store and began franchising its convenience stores. This marked the start of Casey’s rapid growth.
- 1980: Casey’s went public, trading on the NASDAQ stock exchange under the ticker symbol “CASY.”
- 1983: The company opened its 500th store, solidifying its presence in the Midwest.
- 1990s: Casey’s continued to grow, opening more stores and expanding its offerings to include prepared foods and pizza. The pizza became especially popular and is a hallmark of Casey’s stores.
- 2006: Casey’s faced a hostile takeover attempt by Alimentation Couche-Tard, a Canadian convenience store operator. Casey’s successfully fended off the takeover bid.
- 2010: The company celebrated the opening of its 1,500th store and continued to expand into new markets.
- 2015: Casey’s introduced online ordering for pizza, further enhancing its reputation for quality and convenience.
- 2017: The company achieved another milestone by opening its 2,000th store.
- 2020: Casey’s faced challenges due to the COVID-19 pandemic, but its convenience stores remained essential services, serving local communities with fuel, groceries, and prepared foods.
- 2021: Casey’s expanded its footprint by acquiring Buchanan Energy, a chain of convenience stores with locations in the Midwest and Southeast. This acquisition added 94 stores to Casey’s portfolio.
- 2022: The company continued to innovate, offering delivery options and expanding its digital presence to meet evolving customer preferences.
Present: Casey’s General Stores operates over 2,500 convenience stores across 16 states, primarily in the Midwest. It is known for its commitment to serving rural and small-town communities with essential goods, fuel, and a diverse range of food offerings.
Future: Casey’s continues to explore opportunities for growth and expansion while focusing on enhancing its digital presence, customer experience, and product offerings to remain a leading player in the convenience retail industry.
Casey’s General Stores has evolved from a single convenience store in Iowa into a major player in the convenience retail industry, with a strong emphasis on community service and customer convenience. Its iconic pizza and commitment to small-town America have made it a beloved brand across the Midwest and beyond. The company’s ability to adapt to changing consumer preferences and market dynamics has allowed it to maintain steady growth and relevance in the competitive retail landscape.
➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this step for us automatically. A stock is either classified On Sale (Potential Buy), Watch (Hold), or Overpriced (Potential Sell). The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make. To determine if a stock is a definitive “Buy” or “Sell”, it’s wise to complete a 4M Confidence Booster.
- Summary: On Sale
- Score: 83/100
- MOS: 62%
- Share Price: $271
- Fair Value: $453
- Revenue: $15B
How does Casey’s make money?
➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Casey’s General Stores generates revenue through a combination of retail operations, including convenience stores, fuel sales, and food service offerings. Here’s a breakdown of how Casey’s makes money:
Retail Sales:
- Convenience Stores: Casey’s operates a network of convenience stores primarily in rural and small-town areas. These stores sell a wide range of consumer goods, including groceries, snacks, beverages, tobacco products, and health and beauty items.
- Merchandise Sales: Revenue is generated from the sale of merchandise, such as groceries, beverages, and other everyday items, within the convenience stores.
- Prepared Foods: Casey’s is known for its food service offerings, including pizza, subs, and breakfast items. Revenue is generated from the sale of these freshly prepared foods.
- Alcohol Sales: In some locations, Casey’s sells alcoholic beverages, contributing to its retail sales revenue.
- General Merchandise: The stores often carry general merchandise items like clothing, automotive supplies, and seasonal products, which contribute to sales revenue.
Fuel Sales:
- Gasoline: Casey’s convenience stores typically include fuel stations where customers can purchase gasoline and diesel fuel. Revenue is generated through fuel sales, with prices subject to market fluctuations.
- Fuel Margins: While fuel prices can be volatile, convenience stores often earn margins on fuel sales, which can contribute significantly to overall revenue.
Digital and Online Orders:
- Online Pizza Orders: Casey’s offers online ordering for its popular pizza and other food items, generating revenue through digital and in-app orders.
- Mobile App: The Casey’s mobile app allows customers to order food and pay for merchandise through their smartphones, contributing to digital sales revenue.
Delivery Services:
- Pizza and Food Delivery: Most of Casey’s locations offer delivery services for their food items, such as pizza and subs. This service generates revenue through delivery fees and increased food sales.
Franchise Fees:
- Franchise Operations: Casey’s has a franchise program that allows individuals to operate Casey’s-branded stores. The company collects franchise fees and royalties from franchisees, contributing to its revenue.
Advertising and Marketing Partnerships:
- Promotions and Advertising: Casey’s collaborates with various brands for promotions and advertising within its stores, generating revenue through marketing partnerships.
Loyalty Program:
- Casey’s Rewards: The company offers a loyalty program that rewards customers for repeat purchases. Revenue is generated through increased customer engagement and loyalty.
Private Label Products:
- Private Label Brands: Casey’s may offer private-label or store-brand products, which can provide higher margins compared to branded products.
Real Estate Transactions:
- Property Sales and Leases: In some cases, Casey’s may sell or lease properties, generating revenue from real estate transactions.
Acquisitions and Expansion:
- Strategic Acquisitions: Casey’s may acquire existing convenience store chains or fuel stations, expanding its footprint and revenue potential.
➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.
Casey’s (CASY)
- Summary: On Sale
- Score: 83/100
- MOS: 62%
- Share Price: $271
- Fair Value: $453
- Revenue: $15B
The top 5 competitors of Casey’s
Exxon Mobil (XOM)
- Summary: On Sale
- Score: 72/100
- MOS: 56%
- Share Price: $106
- Fair Value: $218
- Revenue: $398B
Shell (SHEL)
- Summary: Watch
- Score: 89/100
- MOS: 35%
- Share Price: $66
- Fair Value: $92
- Revenue: $381
Phillips 66 (PSX)
- Summary: On Sale
- Score: 72/100
- MOS: 65%
- Share Price: $112
- Fair Value: $227
- Revenue: $169B
Marathon Petroleum (MPC)
- Summary: On Sale
- Score: 78/100
- MOS: 67%
- Share Price: $148
- Fair Value: $281
- Revenue: $178B
BP (BP)
- Summary: On Sale
- Score: 61/100
- MOS: 73%
- Share Price: $38
- Fair Value: $97
- Revenue: $241B
Score Ranking
- Shell – 89/100
- Casey’s – 83/100
- Marathon – 78/100
- Exxon – 72/100
- Phillips 66 – 72/100
- BP – 61/100
➡️ Goal: It’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. As investors, we should invest in CEOs with humility and integrity. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
Darren Rebelez has been the CEO of Casey’s since 2019. Prior to Casey’s, he was President of iHOP from 2015 to 2019. Prior to IHOP, he was EVP and Chief Operating Officer/SVP Store Operations of 7-Eleven from 2007 to 2014. Prior to 7-Eleven, he served in various leadership roles at ExxonMobil.
Here are some of his biggest accomplishments at Casey’s.
Digital Transformation:
- Under Rebelez’s leadership, Casey’s accelerated its digital transformation efforts to meet evolving consumer preferences.
- The company invested in enhancing its digital platforms, including Casey’s mobile app and online ordering systems.
Online Ordering and Delivery:
- Casey’s expanded its online ordering capabilities, allowing customers to order pizza and other food items digitally.
- The company also introduced delivery services in select locations, providing added convenience to customers.
Loyalty Program Enhancement:
- Casey’s Rewards, the company’s loyalty program, was strengthened and promoted under Rebelez’s leadership.
- The program aimed to boost customer engagement and retention by offering rewards and personalized offers.
Foodservice Innovation:
- Rebelez oversaw initiatives to further develop Casey’s food service offerings, including its renowned pizza and prepared food options.
- Continuous menu innovation and food quality improvement were key priorities.
Expansion and Acquisitions:
- Casey’s continued its strategic expansion efforts during Rebelez’s tenure. The company opened new stores and explored opportunities in both existing and new markets.
- The acquisition of Buchanan Energy in 2021 added 94 stores to Casey’s portfolio, contributing to the company’s growth.
Community Engagement:
- Casey’s has a strong tradition of community involvement, and Rebelez emphasized this aspect of the company’s identity.
- The company continued to support local communities through charitable initiatives and sponsorships.
Financial Performance:
- While at Casey’s helm, Rebelez aimed to improve the company’s financial performance.
- He worked on cost control measures and strategies to enhance profitability.
Shareholder Value:
- Enhancing shareholder value is a significant metric for any CEO. Rebelez likely focused on strategies to boost Casey’s stock performance and dividend payouts.
Sustainability Initiatives:
- Sustainability became an increasingly important focus in the convenience store industry during Rebelez’s tenure.
- Casey’s may have explored sustainability initiatives, such as energy-efficient store operations or eco-friendly packaging.
COVID-19 Response:
- The COVID-19 pandemic posed challenges and opportunities for convenience stores. Rebelez and Casey’s team likely implemented measures to ensure the safety of customers and employees while meeting increased demand for essentials.
Glassdoor Rating
Glassdoor Company Rating: 3.1
Glassdoor CEO Approval: 49%
➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.
This article from fool.com states that Casey’s latest earnings results show a resilient business to the macroeconomic challenges affecting other retailers.
This article from investopedia.com states that Shares of Casey’s General Stores Inc. (CASY) hit an all-time high after the convenience store operator posted better-than-expected profit on demand for pizzas.
This video from CNBC lists 3 stocks to consider adding to your portfolio. Those three stocks include UPS, Casey’s, and TKO Holdings (a merger between WWE and UFC). Casey’s was added to the list because it’s a fast-growing gas station/convenience store franchise.
➡️ Goal: All of our homework on this company leads up to the 4M Confidence Booster. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.
✅ MOS: Casey’s financials are fantastic. A score of 83/100 and MOS of 62% tells us this is a well-operated company. It’s also important to highlight that Casey’s beat their earnings estimate by 34% in September.
✅ Meaning: Gas stations don’t make a lot of money on gasoline as the margins are so slim. They make their money on food, drinks, and other revenue channels. When it comes to additional revenue channels, Casey’s is doing everything right. If you like pizza, you should give them a try as they are apparently very good. I also like the fact that they offer a rewards program for repeat customers, a mobile app for convenient online purchases, and advertising.
✅ Moat: There are gas stations and then there are gas stations that create an experience. The latter applies to Casey’s and not too many gas stations fall into this category. In the mid-west, you have Casey’s and Kwik Trip, arguably two of the most popular gas stations. In the south you have Buc-ee’s which is known as the Word’s Largest Gas station. Think of it like Casey’s meets Walmart. Overall, Casey’s as separated itself from the competition by being more than just a gas station.
✅ Management: Darren Rebelez has a lot of great experience and is doing a great job as CEO. The issues are the Glassdoor reviews. A company rating of 3.1 and CEO approval of 49% are awful. I spent some time combing through reviews and the majority of the comments are directed towards store managers and regional managers. Because they are growing fast, they are bringing in people to manage stores without leadership skills. Sure, they may have management skills but leadership skills are entirely different. In summary, their managers don’t know how to treat employees with respect. Instead of listening to employees to make the customer service experience better, they are listening to corporate. If you want to make a better experience for your employees, you need to listen to your employees, not corporate. If I were Rebelez, I would take some time to visit stores and talk to front-line employees. When you have low scores in a company, the result can be high turnover which is a massive cost in itself. Time to get ahead of it before high turnover becomes a serious problem. Although middle management could use some coaching, I’m still giving Rebelez a pass on the Management.
8. Is Casey’s stock a good buy?
Casey’s is indeed a good stock to consider adding to your portfolio. The stock has returned 23% year to date and over 117% over the last 5 years which is about a 17% return per year. I would consider this stock a “fly under the radar” stock. Not too many know about it but it has strong financials and as a result, the share price has consistently increased year over year.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
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