Dollarama (TSX:DOL) is a standout Canadian stock that embodies the perfect blend of resilience, adaptability, and growth. Its position as a retail giant specializing in affordable products makes it an enduring favourite among investors looking for a long-term buy-and-hold opportunity. The company’s consistent financial performance, strategic growth plans, and ability to navigate challenging market conditions solidify its reputation as a compelling choice for building wealth over time. So here’s why if there was only one stock to buy, I’d buy Dollarama stock.
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The numbers
In its most recent financial results for the third quarter of fiscal 2025, Dollarama stock once again delivered impressive numbers. Revenue climbed 5.7% year-over-year to reach $1.6 billion, while comparable store sales rose by 3.3% – a remarkable feat considering the 11.1% growth achieved in the same quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 6.5% to $509.7 million, with an EBITDA margin of 32.6% – thus reflecting strong operational efficiency. Net earnings increased by 5.6% to $275.8 million, and diluted earnings per share (EPS) surged by 6.5% to $0.98. These results demonstrate the company’s ability to sustain profitability even in the face of broader economic uncertainties.
Dollarama stock’s price has also performed admirably over the past year, trading near its 52-week high of $152.97. This upward trajectory reflects investor confidence in the company’s business model and future prospects. Analysts are largely optimistic, with a consensus recommendation of “Moderate Buy.” Many firms have raised their price targets for Dollarama stock, underscoring its appeal as a reliable growth stock. The stock’s beta of 0.54 further highlights its stability, making it less volatile compared to the broader market – a quality that’s especially attractive to risk-averse investors.
The company’s growth strategy focuses on aggressive store expansion and product diversification. Dollarama stock currently operates over 1,600 stores across Canada and aims to increase that number to approximately 2,200 by 2034. It plans to open 60 to 70 new stores annually, a move that will drive steady revenue growth and strengthen its market position.
More to come
In addition to its domestic success, Dollarama stock is exploring international growth opportunities. Its increased stake in Latin American value retailer Dollarcity, now at 60.1%, signals a strategic move to tap into emerging markets. The company also plans to pilot stores in Mexico by 2026, setting the stage for a new chapter of geographic diversification.
Dollarama stock’s financial health is another reason for investor confidence. With a profit margin of 17.9% and an operating margin of 25.6%, the company has consistently demonstrated its ability to generate strong returns. Although its debt-to-equity ratio of 391.2% might raise eyebrows, the company’s robust cash flow mitigates concerns about its leverage. Dollarama stock reported operating cash flow of $1.6 billion and levered free cash flow of $942.6 million over the trailing 12 months, thus ensuring ample liquidity to fund growth initiatives and manage debt obligations.
The company’s dividend policy also appeals to income-focused investors. While the forward annual dividend yield of 0.25% may seem modest, Dollarama stock maintains a low payout ratio of 8.4%, reinvesting the majority of its earnings into growth opportunities. Furthermore, Dollarama stock’s history of stock splits, such as the 3:1 split in 2018, indicates a commitment to keeping its shares accessible to retail investors.
Foolish takeaway
Looking to the future, Dollarama stock’s outlook remains bright. Analysts project annual earnings growth of 9.3% and revenue growth of 6.9%, with EPS expected to grow by 10.6% annually. These projections underscore the company’s ability to adapt to evolving market conditions while maintaining its trajectory of consistent growth. The value retailer’s resilience during economic downturns further cements its status as a reliable investment.
All considered, Dollarama stock offers a compelling case for investors seeking a buy-and-hold stock with a strong track record, promising future, and capacity to adapt to market dynamics. Its steady financial performance, ambitious growth plans, and strategic focus on customer value make it a standout option on the TSX. For those aiming to build long-term wealth, Dollarama stock is a name to watch. And, perhaps, to hold for the long haul.
