Quarter after quarter, earnings after earnings, Dollarama (TSX:DOL) continues to beat out estimates and expectations. The low-cost retailer has seen its revenue grow, profit grow, and stores grow all while dealing with the fallout of a worldwide pandemic.
Yet with shares up 24% in the last year and shares hovering around $100, is the stock still valuable? Or should investors consider getting out before it’s too late?
Experts agree
When it comes to Dollarama stock, analysts generally agree that the company is a strong base for a portfolio. This comes from several reasons. Dollarama stock has proven to be a valuable company to hold during economic downturns. With a focus on low-cost retail, consumers head to it again and again.
These consumers come back thanks to the company’s brand expansion. It now offers recognized brand names that, while not $1, are still below the retail cost at other locations. Furthermore, the company has also seen growth from expansion throughout the last few years.
The expansion comes from two sources. Dollarama stock expanded into Latin America through the purchase of Dollarcity. This has proven quite successful, allowing the stock to continue its growth, albeit conservatively. This has included store growth in Canada, with the potential for larger acquisitions.
Rumours abound
Analysts have now heard rumblings that Dollarama stock could also purchase an Australia low-cost retailer. While the company has long been quite conservative about expansion, now could be an excellent time to consider the option.
Dollarama stock remains strong, with both equity and cash on hand for such an investment. Furthermore, the market is down, offering a cheap option for the company to create a quick expansion project. And honestly, this is what the company could need to continue growth.
After the market starts to rebound, investors may also consider dropping Dollarama stock. As consumers head back to their local markets and shops, they may lean away from Dollarama stock in the process. Therefore, it will need more growth from other means.
Rise or fall?
Analysts expect the stock to continue this exploration of global acquisitions as its main means of large growth. It’s an easy business model to export, it’s successful, it has high rates of return, and it can keep up with the company’s expected growth.
That being said, the focus should remain on local growth in the near future and developing its Latin America returns. Management has always been conservative when it comes to growth. So, it will need to be the right time and, importantly, the right price to consider another global move.
Yet again, the balance sheet supports it at this point. A deal of up to $1 billion could be just fine, in the words of one analyst. However, a smaller one could help the stock’s organic growth. In any case, Dollarama stock should continue to outperform. Not just during economic uncertainty but far into the future as well. So, certainly consider this resilient stock, whether it’s now or during a dip. Just make sure you then take on a long-term hold approach to squeeze out every penny.
