Investors who are familiar with distribution stories like Sysco (SYY) and United Natural Foods (UNFI) will see a lot of recognizable features in Core-Mark Holding (CORE).
This company is still small in terms of market cap, but it is one of
only two convenience store distributors to operate on a national scale.
Not only could Core-Mark benefit by acquiring more C-store customers
(through competitive gains or distributor acquisitions), but growth in
the company's value-added services could offer powerful margin leverage
in the coming years.
To be sure, this is a low-margin business and
it will always be so. But if Core-Mark can close even just a small part
of the gap in free cash flow margins between itself and the likes of
Sysco or UNFI, the growth in free cash flow and the stock price could be
impressive. These shares have already had a good run this year, but
still look more than 30% undervalued to me today.
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Core-Mark Holding Could Be A Core Holding
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