When it comes to high-quality growth stocks that consistently outperform the rest of the market, there’s no question that Dollarama (TSX:DOL) is one of the very best.
For years now, Dollarama has not only grown its sales rapidly but also consistently increased its profitability.
The stock has one of the best-known brands in Canada and continues to be a top choice for consumers looking to buy staples as cheaply as possible. It’s this business model that continues to allow Dollarama stock to outperform.
For example, when the economy is weakening, and most stocks across various industries face increasing headwinds, Dollarama stock naturally sees tailwinds.
However, even once the market has recovered, consumers typically stick to their spending habits and continue to save money by shopping at Dollarama, leaving more cash in their pockets for discretionary spending.
Despite its ability to grow in any economic environment, though, it’s not just Dollarama’s business model that makes it such a high-quality investment, as there are plenty of other discount retailers across the country.
In addition to its business model, management has done an incredible job over the years, opening new stores and improving its merchandising to maximize the revenue Dollarama generates for every consumer who walks through its doors.
After an incredible run over the last three years, though, where the stock has gained more than 127%, it’s natural to wonder whether Dollarama stock is still worth buying in 2025.
So, let’s look at Dollarama’s outlook in the coming years, as well as its current valuation, to determine whether to buy, sell or hold Dollarama today.
Is Dollarama stock still worth buying in 2025?
As I mentioned above, when the economy starts to worsen, Dollarama naturally sees an increase in foot traffic in its stores, translating to a significant increase in sales.
For example, throughout 2022 and 2023, when inflation was surging and interest rates were rising rapidly as a result, Dollarama saw same-store sales growth (SSSG) of 12% and 12.8%, respectively. That SSSG led to an increase in sales of 16.7% throughout 2022 and 16.1% through 2023.
Furthermore, and more importantly, its normalized earnings per share (EPS) increased significantly, up over 26% in 2022 and more than 28% in 2023.
Yet even now, as the economy has improved, Dollarama stock continues to perform well. For example, throughout 2024 analysts anticipate that Dollarama’s sales again increased by 8.9% and its normalized EPS jumped by 14.1%.
This shows exactly how impressive of a job Dollarama’s management has done. For example, back in 2020, its net income margins were roughly 14%. That’s already increased to more than 17% and is expected to climb to more than 19% over the next 24 months.
This isn’t necessarily surprising, though. Dollarama continues to open approximately 65 new stores each year with a target of 2,200 stores across Canada by 2034, compared to the roughly 1,600 stores it operates today.
Furthermore, on average, it takes Dollarama stock just two years to earn back the cash flow it takes to open new stores, demonstrating how it continues to grow both sales and profitability so quickly.
Plus, on top of its impressive operations in Canada, Dollarama’s investment in Dollarcity, a Latin American discount retailer, offers plenty of growth potential, with Dollarama targeting 1,050 stores by 2031, up from just under 600 stores today.
Therefore, there’s no question the impressive Canadian growth stock continues to have a tonne of long-term potential. The real question, however, is whether Dollarama’s current valuation makes it a worthwhile investment today.
Is the discount retailer worth buying in 2025?
Despite gaining more than 125% over the last three years, in the last two months, Dollarama stock has sold off by nearly 10%, making now the perfect opportunity to gain exposure.
There’s no question the stock is expensive. However, as one of the very best growth stocks in Canada, it’s not surprising to see Dollarama trade with a growth premium.
So, although its forward price-to-earnings ratio is 31.8 today, it’s actually down significantly from its high just a few months ago of nearly 36 times.
Therefore, considering Dollarama’s ability to grow sales and profitability in any economic environment, its significant long-term potential more than justifies its current valuation, making it a stock investors can buy for the long haul today.
