Convenience store operator Casey's General Stores (Nasdaq:CASY) prides itself on a rural base of stores in approximately 11 Midwestern states. These locations help keep the stores out of the way of other national retailers and therefore stoke demand for its snacks, smaller grocery items and high-margin fountain foods and drinks. Combined with solid expansion potential, the stock could be worth paying up for.

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Recent Developments

Casey's closed out its fiscal year and reported impressive full-year sales growth of roughly 22%. Total sales reached nearly $7 billion. Every major product category, including gas, grocery and other merchandise, and prepared food and fountain items, reported positive fourth quarter and full-year growth. Comparable sales of gasoline fell for the year, but total gallons sold still increased. The other two categories, which are higher margin and sell well-known brands from the likes of Coca Cola (NYSE:KO), Pepsi (NYSE:PEP) and Kraft (NYSE:KFT), reported growth ahead of plan. New store growth also helped the top line. For the year, Casey's bought 35 locations and opened 30 new stores. Total store count ended at 1,699.

Slightly higher cost growth resulted in pre-tax earnings growth of over 21% to $183.5 million. A more modest income tax expense increase resulted in net income growth of about 23% to $116.8 million, or $3.04 per diluted share. Share buybacks helped push the earnings growth to an impressive 37%. The company did not provide cash flow details in its press release.

SEE: 6 Bad Stock Buyback Scenarios

Outlook and Valuation
For the coming year, Casey's plans to post positive same store sales growth in each of its sales categories. It also plans to grow it total store base another 4% to 6%, as it did in fiscal 2012. It will also replace 20 stores and remodel up to 75 existing stores. Analysts currently expect this to translate into total sales growth of around 11%, total sales of nearly $7.8 billion, and earnings of $3.54 per share. This translates into a forward P/E of around 15.4.

The Bottom Line
So far this year, Casey's stock is handily outperforming peer the Pantry (Nasdaq:PTRY), and also beating the overall market. Given its solid growth track record and plans for more of the same going forward, there is little reason to see it continuing to grow its shareholder's wealth. The valuation, as indicated by the earnings multiple, isn't overly compelling, but the absolute levels of sales and profit growth are, and suggest that the stock might be worth paying up for.

SEE: How To Analyze Mid-Cap Stocks

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Tickers in this Article: CASY, PTRY, KO, PEP, KFT

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