Casey's General Stores (CASY)

Total return at 5 years: -4.5%/year = -5.1% appreciation + 0.6% dividend. The target price ($497) is ex-dividend; the $17 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $587 · Multiples $414) is below the market price ($646).

Today — expensive, no margin of safety: at $646 trades ~56.0% above its value discounted to today (~$414); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$258.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($646) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (8.7%/year) above our base case (6.5%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$1.1 bn of owner earnings in year 5 (vs ~$1 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Single-operating-segment convenience store chain. Valued at the enterprise level via EV/EBIT on operating income, with cash and debt entering through the bridge (cash US$523 million against debt US$2,432 million). Year 0 is the twelve months ended July 31, 2026, built by levels from fiscal 2026 plus the first quarter of fiscal 2027. ⚠️ The revenue growth of those twelve months (+13.8%) is not extrapolable, and year 1 does not inherit it: it is mostly the pass-through of fuel prices, which flows into gross revenue with no margin of its own. The operating drivers show this clearly — in the quarter, inside same-store sales rose 3.2% and same-store fuel gallons fell 0.3%, while total quarterly revenue rose 24.3%. The same effect compresses the year-0 operating cash margin (7.44% against 7.85% in the prior fiscal year), because the denominator grows without cash growing along with it; the path recovers this as the fuel price normalizes. Operating income, by contrast, did grow with the business (quarterly net income +27.1% and pre-tax, pre-depreciation income +17.1%, with a fuel margin of 47.8 cents per gallon), so the year-0 operating margin holds at 5.9% and is the one that drives the valuation. Year 1 anchors to fiscal 2027 guidance, which the company reiterated unchanged: inside same-store sales of +2% to +5%, same-store gallons of −1% to +1%, and pre-interest, pre-tax, pre-depreciation income of +8% to +10%. Combining the two anchors, consolidated revenue grows ~5.5% in year 1 and the path decelerates smoothly toward a durable rate of ~4.8% by year 5, consistent with a mature convenience chain. Maintenance capex is set ≈ depreciation: total capex runs above it, but revenue growth is contaminated by fuel prices and by the Fikes (CEFCO) acquisition, so applying the Greenwald formula to that variation as-is would understate the real growth capex from store openings; the nuance is declared rather than applying the formula blindly. The base exit multiple (13.6×) sits in the low-middle of the specialty retail band (12-17×): return on invested capital is good but not exceptional, the moat is narrow with a stable direction, and the terminal growth rate (~4.8%) is far from that of a high-growth compounder.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $497 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $646, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $497 in 5 years plus $17 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $414. Against the current market price ($646), the margin of safety is -56.0% (trades above the maximum → a premium is paid) and the total return at that price would be -4.5% annually.

• Current multiple. The market price implies 24× operating income over the last twelve months, well above the 12-17× band of the specialty retail archetype.
• Expected return. The CAGR at market price is -4% in the base case.
• Margin of safety. No margin of safety: the price already discounts a demanding scenario.
• Price catalyst. The FY2026 addition to the S&P 500 index drew forced passive buying, a demand factor unrelated to business fundamentals.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (108%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Operating cash flow grew from $0.88bn to $1.38bn between FY2023 and FY2026, with solid conversion of earnings to cash.
• Return on capital. Return on invested capital is 13.8%, above the 10% bar but short of the exceptional level.
• Reinvestment runway. There is still room to open stores and acquire smaller regional chains, though it is not a structural high-teens growth runway.
• Fuel margin predictability. Margin per gallon fluctuates significantly and unpredictably per the 10-K itself, which introduces quarter-to-quarter noise.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The business's two volume × price engines differ by category: fuel = gallons sold × gross margin per gallon (highly volatile quarter to quarter, per the 10-K itself); in-store = same-store sales × category margin, with the mix shift toward high-margin prepared food as the structural lever of profitability. Store count is the unit driver that sustains long-term growth above same-store growth.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-jul-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Unit growth. At least 120 new stores planned for FY2027 on a base of 2,944, via construction and opportunistic M&A.
• Same-store sales. 3.9% in grocery and 5.2% in prepared food in FY2026; FY2027 guidance contemplates a range of 2% to 5% in-store.
• Growth via M&A. The Fikes/CEFCO acquisition (198 stores) contributed a large part of FY2026 revenue growth, which complicates reading pure organic growth.
• Fuel growth. Same-store fuel volume grew just 1.4% in FY2026 and FY2027 guidance contemplates a range of -1% to +1%.
• Geographic expansion runway. 19 states with room to densify existing rural markets, without an aggressive geographic expansion declared.

• Consumption recurrence. Fuel and food are recurring necessity spending, with low sensitivity to the economic cycle for the essential portion.
• Product differentiation. Prepared food (pizza, wings) differentiates against generic convenience, capturing a gross margin of nearly 59%.
• Pricing power. Limited in fuel due to pressure from non-traditional retailers that use price as a loss leader; stronger in prepared food.
• Operating leverage. Modest: FY2026 revenue growth came partly from M&A, and operating margin expands gradually, not abruptly.
• Recession behavior. Spending on fuel and basic convenience is relatively resilient, though the mix shift toward higher-priced prepared food could suffer.
• Geographic concentration. Close to half of the stores are in Iowa, Missouri and Illinois, a regional exposure that limits diversification.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)11.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 108% of ROIC
• !Value creation (ROIC − 10% bar)+4pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.6x
• ✓Float / working capitalFrees up cash $0 bn (float / negative WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.3% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Liquidity. $523M in cash and more than $1.4bn in available liquidity including undrawn credit lines.
• Leverage. Total debt of $2.43bn against equity of $3.95bn; a manageable level for the business's cash flow.
• Interest coverage. Net interest expense in FY2026 ($96.6M) is a minor fraction of operating income (~$1.03bn).
• Ownership structure. The company owns most of its stores and distribution infrastructure, reducing lease risk.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Dividend track record. 27 consecutive years of dividend increases, with a 14% raise in June 2026 on a payout that is still low.
• M&A discipline. Acquisitions concentrated in regional convenience chains (Fikes/CEFCO), consistent with the core business.
• Incentive alignment. The extracted proxy does not break out director and executive ownership; declared as a pending gap.
• Share buybacks. Authorization expanded to $1,000M remaining in June 2026, with no expiration, though net FY2026 buybacks were moderate relative to market value.

• Broad analyst coverage and passive flows following the FY2026 addition to the S&P 500 index, the opposite of a business without buyers
• No signs of a forced seller or of a cycle trough
• The FY2026 fuel margin (42.6¢/gallon) was unusually high per the 10-K itself, a tailwind that may not repeat

No clear source of a Marks-style discount is identified (neither missing buyers nor a motivated seller): the current price appears to reflect optimism about the index addition and recent execution, more than a perception-reality discrepancy in the buyer's favor. No margin of safety: the price already discounts a demanding scenario.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -11%/year (-45% total): the margin of safety protects the downside. The bull (+1%/year, +7% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Fuel margin reversion. The 42.6¢/gallon margin in FY2026 was unusually high per the 10-K itself, with a fourth quarter of 46.9¢ that may not repeat.
• Cybersecurity. Handles large volumes of card and customer data; it is the first risk listed in the 10-K by materiality.
• Ingredient cost. Cheese, the main prepared food input, is subject to significant price fluctuations.
• Labor market. Recent shortage of qualified personnel and upward wage pressure in store and distribution roles.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 14% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a multiple/growth of 3.6 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 14% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 9% vs our 7%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -12%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale, intangibles, switching costs → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 9% vs our 7%: coherent, but at the optimistic end of the range.