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Casey’s on the Street: Why All the Optimism?

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Mar. 3 2017, Updated 9:06 a.m. ET

Wall Street’s view of Casey’s

Casey’s General Stores (CASY) is covered by 13 Wall Street analysts, who have jointly rated the stock a 1.8 (1 meaning a “strong buy” and 5 meaning a “sell”). This means that Casey’s has a better rating than peers Murphy USA (MUSA), Kroger (KR), and Supervalu (SVU), which are rated 1.9, 2.2, and 2.6, respectively.

Specifically, ten of the 13 analysts covering Casey’s have rated the retailer as a “buy,” while three have set a “hold” rating. None of the analysts thinks Casey’s is a “sell” right now. Convenience store peers Murphy USA and CST Brands (CST) do not currently have any “sell” ratings either.

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Analyst ratings and target prices

Casey’s stock is currently trading at $116.03, which is 17% below its 52-week high price. Wall Street sees a good upside potential in the stock and expects its price to increase 16% to $134.31 over the next 12 months. The individual target prices for the company range between $115 to $150.

By comparison, Murphy USA, which has already gained 6.5% this year, is expected to rise further. The stock is expected to jump 18% over the next 12 months. CST Brands, however, already seems to be trading at the right price. Analysts do not expect any price increase for this stock.

Valuations

Casey’s is currently trading at a one-year forward PE (price-to-earnings) ratio of 20x, which is closer to the lower end of its 52-week PE range of 18x–23.3x.

Notably, Casey’s is cheaper than CST Brands, which is valued at 28x. Murphy USA, however, has continued to trade at a discount to Casey’s, having been valued at 14x its next 12-month earnings.

Investors looking for exposure to Casey’s through ETFs might consider the First Trust Consumer Staples AlphaDEX Fund (FXG). CASY makes up 0.81% of FXG.

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