Investors in Dollarama (TSX:DOL) stock are likely feeling pretty good about themselves these days. Especially if they purchased shares back during the pandemic. Dollarama stock has come out a huge winner in the last few years, providing essential products and protection during economic downturns.
But is there more growth coming for Dollarama stock? Or is the best of times over for now? Let’s take a look and see.
What’s happening with Dollarama stock
Shares of Dollarama stock are up 14.6% in the last year, at the time of writing this article. However, pandemic shares are up 80% during that time. As mentioned, that’s because these companies provide essential items even during the pandemic, and demand continues to expand.
For Dollarama, part of that expansion comes from the ability to get back to normalcy in a relatively quiet period of time. What’s more, the retailer has been able to expand its offerings. You can still purchase the low-cost items, but with the addition of more recognized brand names at albeit higher costs.
Even so, these costs remain lower than in most stores. Furthermore, the company tends to only increase prices when they have to and, therefore, are one of the last locations affected by inflation. Especially as revenue continues to climb given many Canadians seek lower-cost items during difficult financial times.
Earnings prove it
Dollarama stock continues to beat earnings estimates, bringing in growth across the board during its most recent first quarter report for 2023. Comparable store sales were up 17.1% year over year, and its earnings before interest, taxes, depreciation and amortization (EBITDA) up 22.1% to $366.3 million.
The company increased its diluted earnings per share (EPS) by 28.6%, and sales rose 20.7% to $1.3 billion for the quarter. Yet, with 21 new stores opened in the quarter, compared to 10 the year before, management seems to believe more growth is on the way. Especially as Canadians continue to look for low-cost items.
“Canadians from all walks of life continue to respond positively to our compelling value proposition and affordable product mix. In the context of persistent inflationary pressure, we delivered a 17% increase in comparable store sales in the first quarter of fiscal 2024. The first quarter also marked the opening of our 1,500th Dollarama store, a significant milestone as we pursue our target of 2,000 stores across Canada by 2031.”
Neil Rossy, President and CEO
Hitting that target
A few issues will affect Dollarama stock’s continuing to climb. It’s no longer the growth stock it once was, though many investors are seeing opportunities for growth in the market right now. And as inflationary pressures and interest rates ease, this will probably accelerate.
Furthermore, the recent departure of the company’s chief financial officer has put a damper on share prices. Even so, long-term investors should continue to see earnings rise, especially with a 2,000 target in the next few years. However, at this rate I would focus more on the near term.
Dollarama stock continues to trade incredibly close to 52-week highs. Its fundamental metrics aren’t cheap either, so you’re not getting a deal at this rate. I would therefore wait until shares slump further in a rebounding market. When that happens, buy and hold Dollarama stock so you can get the gains your friends are currently bragging about.
