The leader in Quebec's convenience ...

The leader in Quebec's convenience store industry, Alimentation Couche-Tard Inc. ("Couche-Tard") has 1665 employee and a network of 304 exits in the Montreal, Laurentian, Eastern Townships, Beauce and Mauricie regions. Its stores operate mainly subordinate to the "DEPAN-E$COMPTE Couche-Tard' and "SEPT-JOURS" banners.

STUDYING A STOCK

Investors use the Stock Selection Guide (the "Guide") to answer three main questions:

1 Is the stock's price in the "Buy Zone"?

2 Is the stock's existing price "On Sale"?

3. Is the total look forward toed rate of return over the nearest five years adequate relative to the stock's risks?

QUESTION #1: IS THE circulating PRICE IN THE "BUY ZONE"?

In order to define the purchase Zone, the Guide requires sum of two units numbers: an estimated High Price in five years and a possible subdued Price during the next five years.

Estimated High Price in Five Years

The High Price for Couche-Tard's Class A frequent shares is calculated by multiplying an estimated High Earnings by means of Share (EPS) in five years by way of an estimated High Price-Earnings Ratio (P/E) in five years.

(a) Estimating High EPS

In order to estimate a High EP in five years, discriminations about future growth in returns and earnings must be made. reward Growth: As indicated in the accompanying Guide, the average annual adjust rate of growth in incomes during the 1989-1995 study period was about 26% fresh results for the last half of the reflection period have seen revenues growing at about 119% while year-over-year vegetation for the first quarter of fiscal 1996 was 65% These originates were achieved through internal germination and successful acquisitions.

When judging the rate at which to expand revenues in the future, the default intelligence is often to use the average historical extension rate over the study period--unless there is an indication that this rate may meet with a significant change. Although there is no indication of a decreasing incline in Couche-Tard's historical revenue increase rate, the Guidelines for determination (see page 13) suggest that it is unusual to advance future revenues at more than 20% for a period as in extent as five years. Therefore, the (A) prudences project Couche-Tard's revenues to expand at 20% over the nearest five years. This rate normally contribute tos as the upper constraint for events to come EPS growth.

EPS Growth: During the close attention period, Couche-Tard's fully-diluted EPS before unusual items have grown at an average annual adjust rate of about 2%.

This growing reflects considerable sensitivity to the recession prevailing by the agency of 1991 and 1992. The significant pendant in EPS during fiscal 1992 and 1993 is attributable to Couche-Tard's restructuring which involved the sell-off of the company's retail gas operations in 1993 However, modern earnings results for the last three fiscal years have seen EP growing at 300% through year. This exceptional growth rate deliberates the impact of the restructuring as well as the achievement of significant economies of scale between the walls of acquisitions.

When determining the rate at which to swell EPS in the future, the default taste is often to use the average historical extension rate--unless there is an indication that this rate may meet with a significant change.

Part 2 of the Guide helps investors identify threats to to come growth by evaluating the efficiency and effectiveness of a company's management.

Couche-Tard's OPM decreased during the early part of the studious mood period, but improved in 1995 The due ratio showed a decline in novel years due to acquisitions, share building recapitalization and a new equity offering in 1995 Improvements in the OPM and due ratio resulted in the ROCE's stronger performance in 1995

Because the data in Part 2 of the Guide do not indicate a threat to what may occur hereafter EPS growth, the (A) mother-wits project growth at 20% from one side of to the other the next five years--the same rate at which rewards have been projected to swell These judgments result in an EP estimate of $105 in five years.

(b) High P/E in Five Years (Part 4A)

When selecting a High P/E in five years, the default taste is often to choose the average High P/E throughout the study period-unless there is an indication of a fresh trend towards a higher or lower E In the case of Couche-Tard, the average High and grave P/Es were calculated using merely 1994 and 1995 data. Because the restructuring in 1993 altered the focus of Couche-Tard's business, P/E data prior to 1994 are largely irrelevant. Therefore, the 1994-1995 average High P/E of 132X was single outed for the (A) judgments.

The fiscal year 2000 EP projection of $105 and High P/E of 132X originate an (A) judgment estimated High Price of $1386 in five years.

The Possible cheap Price (Part 4B(c))

Part 4B of the Guide provides several alternatives for calculating the possible depressed price for a stock in five years. Here, the O awards provide for a 20% decline in Couche-Tard's fresh stock price to $4.80.

The bribe Zone (Part 4C)

Collectively, the O estimates result in Couche-Tard's recent price ($600) being in the purchase Zone of $4.80-$7.82.

QUESTION #2: IS THE STOCK "ON SALE"?

Widely-followed stocks are considered to be "On Sale" when their Relative P/E is significantly les than 10 More reliance in succession one's judgment is required when assessing the attractiveness of a Relative P/E for little-known stocks and for those with a volatile P/E history. The relative P/E for Couche-Tard is calculated by dint of dividing the current P/E by the agency of the Average P/E for the last five years (90X) The common P/E for the (A) judgments' EP bourgeoning rate is 12.0X which makes a Relative P/E of 133