There’s no shortage of great growth stocks on the market. One of those superb growth stocks is Dollarama (TSX:DOL), and here are three reasons why investors should buy Dollarama stock right now.
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1 Growth is long-term
For those that are unfamiliar with it, Dollarama is the largest dollar-store operator in Canada. Despite the retailer’s presence in Canada, the market is still not saturated, and Dollarama isn’t done expanding. In fact, the company is targeting opening 2,000 stores in Canada by 2030. As of the most recent quarter, the company had just over 1,540 stores across every province.
Few Canadians may realize this, but Dollarama has a growing presence on the international scene too. The company operates under the Dollar City banner in Columbia, Guatemala, El Salvador and Peru. As of the close of the most recent quarter, Dollarama had 480 stores across the region, with 22 net new for the quarter.
Like its domestic segment, Dollarama plans to continue growing its international business. In fact, its Latin American business is far less saturated and mature than its Canadian operations, meaning it can expect stronger growth over the next several years.
The company forecasts having an international network of 850 stores within the next several years. Considering the growth potential in those developing markets, that may be a reason to buy Dollarama stock alone.
2 Results matter
2023 was a crazy year on the market. Rampant inflation and rising interest rates caused havoc for investors. But for all that volatility we saw, it didn’t extend to all corners of the market. Dollarama was a bright exception to that.
Dollarama ended 2023 on a positive note, finishing the year up approximately 20%. When compared with how the market fared, Dollarama nearly tripled the performance of the TSX last year.
And there’s a good reason for that. Volatility and uncertainty force consumers to trade down to less-expensive options. Options such as those found at Dollarama.
That trade-down effect was fully in focus during the most recent quarterly report. In that most recent quarterly report, Dollarama saw sales top $1.5 billion, topping the $1.3 billion in the same period last year.
Much of that growth could be an increase in the total number of stores as well as increased store sales.
Overall, the company earned $261.1 million, or $0.92 per diluted common share. By way of comparison, in the same period last year, Dollarama earned $201.6 million, or $0.70 per diluted common share.
In short, investors looking to buy Dollarama stock can expect that growth to continue.
3 Defensive appeals
Not all investors may realize this, but Dollarama is a defensive stock. The company provides a broad cross-section of goods encompassing multiple segments. Those goods include necessities that have a consistent demand which is unaffected by volatility.
Further to this, Dollarama benefits from its pricing model. The company prices goods at fixed price points up to $5. This provides a welcome and predictable experience for inflation-wary shoppers, and those who shop in smaller quantities.
Additionally, Dollarama often bundles several lower-priced goods under a single price, providing an additional value-added incentive.
Dollarama also offers some defensive appeal from online shopping. The sheer economics of the smaller quantities and products that Dollarama offers still make it the preferrable option. That being said, Dollarama does have an online portal for shoppers to buy in bulk.
In short, Dollarama’s business model generates a reliable and growing revenue stream. The company is also incredibly recession-resistant, which collectively makes it an intriguing moment to buy Dollarama stock.
Will you buy Dollarama stock?
No investment is without some risk, and that includes Dollarama. Fortunately, Dollarama is well-entrenched in the domestic market and continues to grow. Additionally, Dollarama’s aggressive stance on growth has made it a superb option for growth-minded investors.
In my opinion, prospective investors looking for a growth investment should buy Dollarama stock as part of a larger, well-diversified portfolio.
