What happened
Week to date, shares of Casey's General Stores (CASY 0.71%) were up 15.8% through Thursday's market close, according to data provided by S&P Global Market Intelligence.
The company delivered a solid round of financial results for the fiscal first quarter ending July, with same-store sales up 5.4% and earnings per share increasing by 11% year over year.
The balanced top- and bottom-line growth in a challenging retail environment certainly got Wall Street's attention. The stock hit a new all-time high but is still reasonably valued.
So what
Casey's saw good sales performance across several categories. It highlighted the strong sales of its new thin crust pizza, in addition to strong sales of whole pizza pies. Sales of beverages, both alcoholic and nonalcoholic, performed well, too.
The focus on rural locations and on high-margin food and private-label offerings appears to be working to Casey's advantage, with other retailers reporting mixed results this year. Casey's hasn't been immune to the macroeconomic headwinds, as it's not growing as fast as it was a few years ago, but it's handling the challenges much better than others right now. The stock has more than doubled over the last five years, and it could deliver similar returns over the next five years.
Now what
Management is working to keep operating expenses down, which has led to improving operating margin and stellar earnings performance lately. It's also good at executing acquisitions that profitably expand the store base without diluting the company's return on capital. It currently has 125 stores under agreement to acquire.
The stock still trades within its historical price-to-earnings ratio range. This is a well-managed convenience store chain that should continue to deliver returns to shareholders consistent with the performance of the underlying business.
