Where Will Dollarama Stock Be in 5 Years?

Dollarama stock (TSX:DOL) has long proven to be one of the best buys for those seeking long-term gains. But does it still have that advantage over the next five years?

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 3, 2024 8:15 pm EST

Dollarama (TSX:DOL) has been a beacon of consistency in Canada’s retail landscape, and its financial performance in recent years speaks volumes about its resilience and growth potential. With a market cap of $41.1 billion as of late 2024, the company has steadily expanded its footprint and bolstered investor confidence. But can the stock keep it up?

Hourglass and stock price chart — Source: Getty Images

Into earnings

Over the past fiscal year, Dollarama stock reported a 16.1% rise in sales, reaching an impressive $5.9 billion, while comparable store sales climbed by 12.8%. This surge in sales translated to a 29% increase in diluted net earnings per share (EPS), which reached $3.56. For investors seeking reliable growth, these figures are certainly enticing.

Dollarama stock’s strategy of expansion is a significant driver behind its success. In Fiscal 2024 alone, the company added 65 new stores, bringing its total to 1,551 locations across Canada. The management’s long-term vision includes expanding to 2,000 stores by 2031. This means an average of 65 new store openings annually. If this trajectory holds, Dollarama stock could boast around 1,875 stores by 2029, cementing its dominance in the Canadian value retail market.

Trading at $147 as of writing, Dollarama stock has shown resilience even in volatile market conditions. While the immediate forecast is promising, the company’s consistent growth trajectory suggests that its stock could continue to rise over the next five years, provided it maintains its expansion plans and profitability metrics.

More to come

Dollarama stock’s expansion isn’t confined to Canadian soil. Through its partnership with Dollarcity, the company has made significant inroads in Latin America. Dollarcity currently operates 480 stores across Colombia, Guatemala, El Salvador, and Peru, with plans to grow to 850 stores by 2029. This international push offers Dollarama a diversified revenue stream and foothold in emerging markets.

One of the ways Dollarama stock plans to sustain its growth is by introducing higher fixed price points of $5.50 and $6.00 in 2029 and 2030, respectively. These new price points are projected to drive same-store sales growth to around 8% during those years, aligning with the company’s strategy of enhancing its product offerings.

On the profitability front, Dollarama stock has an impressive track record. Its profit margin sits at 17.9%, and its operating margin is a robust 25.6%. Looking ahead, these margins are expected to improve further, with operating margins forecasted to reach 25.4% by 2032. The company plans to achieve this through procurement efficiencies, improved logistics, and leveraging higher price points.

Lock in stability

Another factor contributing to Dollarama stock’s appeal is its stability during economic fluctuations. With a beta of 0.54, the stock exhibits lower volatility compared to the broader market. This makes it an attractive option for risk-averse investors seeking steady returns. Moreover, Dollarama’s dividend payout, while modest with a forward annual yield of 0.3%, adds a layer of income stability for long-term shareholders. Though not a dividend powerhouse, the company’s commitment to rewarding shareholders through consistent payouts enhances its investment case.

The company’s leadership also deserves recognition for steering Dollarama stock through various challenges, including inflationary pressures and supply chain disruptions. Its ability to adapt and innovate has not only safeguarded profitability but also set the stage for future growth. By focusing on operational excellence and customer satisfaction, Dollarama stock has managed to thrive in a highly competitive retail environment, proving its mettle as a market leader.

Foolish takeaway

In five years, Dollarama stock’s story is likely to be one of continued growth and evolution. If the company successfully executes its expansion plans, maintains profitability, and capitalizes on its international ventures, its stock price could reflect these achievements handsomely. While challenges may arise, the foundation Dollarama stock has built suggests a bright future ahead. For investors, the next five years could offer plenty of opportunities to ride this retail giant’s wave of success.