There are actually quite a few stocks managing to do well in 2023. I know; it seems crazy as we continue through this bear market. However, Dollarama (TSX:DOL) stock remains one of the outliers. Dollarama stock has now enjoyed share growth of 25% year to date. And it doesn’t seem to be slowing down.
Is Dollarama stock now due for a dip? Or should investors still consider picking up the stock on the TSX today?
Growth continues
Let’s first take a look at Dollarama stock in terms of its earnings over the last quarter. Its next earnings report is due out in December, so we can perhaps get a view of what investors can expect — especially as Dollarama stock continues to surge past 52-week highs.
Dollarama stock reported a 15.5% increase in comparable store sales year over year for the second quarter. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 23.8% to $457.2 million. This was 31.4% of sales, improving 1% compared to the same time last year.
Its diluted net earnings per share also jumped 30.3%, which combined with an increase in guidance. The fiscal 2024 guidance range should now see comparable store sales growth increase between 10% and 11% for investors.
Analysts weigh in
Growth in guidance is certainly a good thing, and analysts remained increasingly interested in the stock. Yet this was especially given the company’s interest in expanding on a global scale. Dollarama stock has managed to export its business model in multiple areas around the world, including Dollarcity in Latin America. This model includes strong cash flow and a strong return on investment capital.
Furthermore, there is some speculation that Dollarama stock could acquire yet another discount retailer. This time in Australia, it could be very soon that the company announces the purchase of The Reject Shop. This would create even more cash flow for the company.
But if you’re worried about too much growth too soon, don’t be, analysts state. Dollarama stock has a conservative management team that remains focused on increasing Canadian business and developing Dollarcity. Therefore, it’s unlikely to make huge moves until it’s the right time and the right price.
Are the highs worth it?
The question now is whether its current share price, trading at around $100 per share, is worth it. In the view of analysts, this is at fair value. Despite hitting 52-week highs, the stock isn’t in overbought territory even as shares rise higher.
In fact, it continues to trade at a fairly valued 19.09 enterprise value over EBITDA. It also trades at a fair five times sales and has $1 billion on the books that could be perfect for the right acquisition. Finally, you can gain a sweet little 0.27% dividend yield as of writing.
So, yes, shares of Dollarama stock are high. But with that being said, they’re not expensive. So, if you’re looking for a stock that should continue to climb not just through a downturn but far beyond, certainly consider Dollarama stock on the TSX today.
