After rallying by 7.3% in the previous quarter, the TSX Composite Index’s rollercoaster ride resumed in the first quarter of 2024, as macroeconomic concerns continue to keep investors on their toes. When the economy is unstable, you might want to find a dependable Canadian stock you can invest in now and keep in your portfolio for a long time. For example, Dollarama (TSX:DOL) might be a good option. This Mont Royal-based discount retailer has an excellent, years-long track record of yielding positive returns for shareholders.
DOL shares have jumped 622% in the last 10 years to currently trade at $101.66 per share, expanding its market capitalization to $28.5 billion. In this article, I’ll highlight three top things about Dollarama stock that make it a great Canadian long-term stock pick for smart investors.
The resilience of Dollarama’s business model
A key fundamental reason for anyone to consider investing in a stock could be its robust business model, which can enable it to keep growing despite macroeconomic worries. Dollarama primarily focuses on selling affordable products and other essential items to customers, which remain in demand even during an economic slowdown.
Dollarama’s ability to offer diverse products is another cornerstone of its business model. From household goods to personal care items, the firm offers a variety of products that cater to daily needs. This diversification not only helps in attracting a broad customer base but also reduces dependence on any single product category.
Excellent financial growth trends
Its strong financial growth trends during the pandemic phase could be the most recent example of the resilience of Dollarama’s business model. While many big retailers across the globe have faced challenges in recent years due to the negative impact of COVID-19 on their operations, Dollarama’s financial growth trends have remained solid.
The Canadian discount retailer’s total sales grew positively by 55% from $ 3.3 billion in its fiscal year 2018 (ended in January 2018) to $5.1 billion in its fiscal year 2023 (ended in January 2023). In addition, its adjusted annual earnings in these five years jumped from $1.52 per share to $2.76 per share, reflecting an outstanding 82% growth. Its adjusted net profit margin has expanded in the last two consecutive fiscal years. These impressive financials clearly suggest that Dollarama has the ability to maintain strong profitability, even in challenging economic environments, giving smart investors another reason to consider DOL stock for the long term.
Dollarama’s strong growth outlook
Another factor that makes Dollarama an attractive investment option is its strong growth outlook. The company has been expanding its store network across Canada, adding new locations and renovating existing ones to enhance customer experience and sales productivity. At the end of the October 2023 quarter, Dollarama operated 1,541 stores, up from 1,462 a year ago.
Apart from growing its physical presence, Dollarama is also investing in its online channel, which offers individual and business customers the convenience of buying products in bulk at discounted prices. With these growth drivers in place, along with its focus on operational efficiency and adaptation to market trends, Dollarama is well positioned to increase its revenue and earnings in the years to come, which could help its share prices continue soaring.