The power of long-term investing lies in the potential for exponential growth through capital appreciation and compounding returns. That’s why investors are always looking for companies with strong fundamentals, sustainable competitive advantages, and the ability to deliver consistent growth, such as a stock like Dollarama (TSX:DOL), the leading discount retailer in Canada.
Although Dollarama has been a well-known brand for some time now, just 10 years ago, few could have imagined the insane growth that Dollarama’s business and its stock price could achieve in just a single decade.
Despite the fact that it operates in a highly competitive retail landscape, Dollarama has consistently managed to outperform its peers and has rapidly expanded its network of stores across the country, which has allowed it to achieve impressive results.
The fact that it’s a discount retailer is a major reason why. But Dollarama is also excellent when it comes to merchandising and has shown how well it can scale its business, as it rapidly expands its store count.
In fact, over the last 10 years, Dollarama has earned investors a total return of 706% or a compounded annual growth rate (CAGR) of 23.2%.
That means if you had invested $10,000 in Dollarama a decade ago, your investment would be worth over $80,000 today.
So, let’s look at what has made Dollarama such an incredible investment and why it continues to be one of the top stocks that Canadians can buy for their portfolios.
Discount retailers like Dollarama stock are seeing a rapid increase in demand for their products
Investors often have to compromise between stocks that offer significant growth potential and those that are defensive and can help protect your capital when the economic environment is worsening.
However, with Dollarama stock, investors get the best of both worlds, which is a major reason why it’s been such an impressive stock for so many years now.
Dollarama’s discount retailer business model is one that naturally sees a major increase in demand as consumers’ incomes are being impacted. Typically, that means in a recession, which many expect to materialize later this year. However, that can also include high-inflation environments, which we’re also experiencing today.
However, even when the economy is still growing at a healthy pace, there’s never a shortage of consumers looking to buy discounted goods and save extra money to invest or spend on discretionary goods and services.
So, it’s no surprise that Dollarama stock continues to increase its store count each year and is constantly seeing an increase in demand for its goods.
Dollarama continues to see impressive sales growth
One of the main reasons why Dollarama stock has gained so much value over the last decade and why it’s earned investors a total return of more than 700% has to do with its consistent growth in sales.
Just 10 years ago, in 2012, Dollarama’s annual sales were roughly $1.6 billion. Meanwhile, in its fiscal year ending in January 2022, the stock reported over $4.3 billion in sales — an increase of more than 165% over the last decade.
Furthermore, over that stretch, there wasn’t a single year or even quarter where its revenue didn’t increase year over year, including the periods when the economy was growing rapidly and in great shape. In fact, the lowest year-over-year sales growth it’s seen through that stretch was 6.7% back in 2019.
And going forward, analysts expect Dollarama’s sales will continue to increase by roughly 15% in 2023 and another 9.3% in 2024.
Therefore, while this incredible defensive growth stock is trading roughly 10% off its 52-week high, it’s one of the top investments to consider adding to your portfolio.
