Is Dollarama Stock a Buy at All-Time Highs?

Dollarama stock (TSX:DOL) remains at all-time highs while the rest of the market drops. Does this mean it’s due to drop as well?

| More on:

Dollarama (TSX:DOL) has been one of the top performers in 2022. And that’s saying a lot. While other companies, including many retail stocks, are seeing shares drop into oblivion, Dollarama stock remains upward. In fact, it continues to surpass all-time highs.

But does this mean Dollarama stock is due for a drop? Or is this a defensive play perfect for your portfolio? Today, we’re going to see if Dollarama stock remains a buy on the TSX today.

Analysts weigh in

We’re still waiting on third-quarter earnings from Dollarama stock, and already analysts are weighing in on expectations. And what analysts really like is that other similar stores are doing so well. This includes Walmart, which recently saw incredibly strong same-store sales growth in Canada. In fact, over the last few quarters, Dollarama stock has outperformed compared with Walmart.

The point here is that consumers are looking to cheaper areas to make purchases and fight back inflation. In particular, it’s not just the holiday season that investors should look to when it comes to spending. Halloween and back to school will also be high notes for Dollarama stock and its Q3 report.

The company has a strong track record of growth, and during a recession and even poor economy the stock continues to do well. Because of this, analysts believe it’s a strong defensive stock to keep in your portfolio.

Growth should continue

Analysts also believe that same-store sales growth will continue not just for the next quarter, but for full-year 2023 at least. Again, this is pointing to the potential of a recession. This will allow the company to continue its domination of the low-cost retail space.

Not only will Dollarama stock then see more stores increase its growth trajectory, but this will allow it to bring in more superior products. There has already been an increase in more well-known brands over the last few years, which has driven more Canadians who want to keep more cash in their wallets to its aisles. And you really do save, with products offering a discount of up to 50% to 60% compared with comparable products, according to a recent analysis.

Great protection, but is it a buy?

So right now, yes, Dollarama stock does seem like a buy during this down market. It’s acted like a cyclical stock before, doing well in a recession as Canadians look to save money. It certainly offers protection as inflation and interest rates rise. However, what about the long term?

Analysts remain impressed by the growth in stores, as well as sales, and from opportunities abroad. This includes in Latin America. Dollarama stock, therefore, seems to be using its cash from its growing operations effectively, and it looks like a solid long-term hold.

I do, however, stress “long term.” It’s hard to tell what the future holds, especially during a recession. Dollarama stock isn’t immune to drops, and it has yet to go through a major recession. So time will tell how it performs in the next year, and those to come.

Shares of Dollarama stock are up 31% year to date, trading at 33.1 times earnings as of writing.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Watch Out! This is the Maximum Canadians Can Contribute to Their RRSP

We often discuss the maximum TFSA amount, but did you know there's a max for the RRSP as well? Here's…

Read more »

a person looks out a window into a cityscape
Dividend Stocks

1 Marvellous Canadian Dividend Stock Down 11% to Buy and Hold Immediately

Buying up this dividend stock while it's down isn't just a smart move, it could make you even more passive…

Read more »

Blocks conceptualizing the Registered Retirement Savings Plan
Dividend Stocks

CPP at 70: Is it Enough if Invested in an RRSP?

Even if you wait to take out CPP at 70, it's simply not going to cut it during retirement. Which…

Read more »

worry concern
Stocks for Beginners

3 Top Red Flags the CRA Watches for Every Single TFSA Holder

The TFSA is perhaps the best tool for creating extra income. However, don't fall for these CRA traps when investing!

Read more »

Data center woman holding laptop
Dividend Stocks

Buy 5,144 Shares of This Top Dividend Stock for $300/Month in Passive Income

Pick up the right dividend stock, and investors can look forward to high passive income each and every month.

Read more »

protect, safe, trust
Stocks for Beginners

2 Safe Canadian Stocks for Cautious Investors

Without taking unnecessary risks, cautious investors in Canada can still build a resilient portfolio by focusing on safe stocks like…

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Stocks for Beginners

How to Grow Your TFSA Well Past the Average

Need to catch up quick with your TFSA? Consider some regular contributions to this top bank stock, as well as…

Read more »

An investor uses a tablet
Stocks for Beginners

Prediction: Here Are the Most Promising Canadian Stocks for 2025

Here are three top Canadian stocks that could deliver solid returns on your investments in 2025.

Read more »