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Casey’s Had a Bad One, So Why Is Wall Street Still Optimistic?

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Mar. 13 2017, Updated 9:07 a.m. ET

The broad outlook

Casey’s General Stores (CASY) is currently trading at $108.02, which is 26% below its 52-week high price. As discussed in the previous section, the company lost 5.4% of its value after weak third quarter results and a host of analyst actions and reactions. The company posted its most recent quarterly results on March 6.

Wall Street, however, continues to be broadly optimistic about Casey’s. The company, which is covered by 13 Wall Street analysts, has an average target price of $126.33, indicating an upside of 17% over the next 12 months.

Eight analysts have recommended a “buy” for Casey’s, while five analysts have issued a “hold” rating. There is no “sell” rating yet, which confirms that Wall Street continues to be upbeat about the long-term fundamentals of the company.

Overall, analysts seem generally confident about the convenience store industry as peers Murphy USA (MUSA) and CST Brands (CST) don’t currently have any “sell” recommendations either.

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Casey’s ratings and valuations

Casey’s has a rating of 1.8, with 1.0 indicating a “strong buy” and 5.0 indicating a “sell.” The company has a better rating than peers Murphy, Kroger (KR), and Supervalu (SVU), which are rated 1.9, 2.2, and 2.6, respectively.

Casey’s is currently trading at a one-year forward PE (price-to-earnings) ratio of 21.6x, operating in the middle of its 52-week PE ratio range of 18x–23.3x. Notably, the company is cheaper than CST Brands, which is valued at 29.2x. Murphy, however, continues to trade at a discount and is valued at 14.3x its next-12-month earnings.

Investors looking for indirect exposure to Casey’s can consider ETFs like the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL), which has around 2% of its holdings invested in the company.

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