Dollarama: Buy, Sell, or Hold in 2025?

Dollarama stock may be growing like a weed, but does that mean it will continue to do so for future investors?

Amy Legate-Wolfe

Author Bio 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. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy 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. Social Media 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 March 10, 2025 8:45 pm EDT

Dollarama (TSX: DOL) has long been a favourite among Canadian shoppers seeking value. And its performance on the stock market mirrored this popularity. Yet as we delve into 2025, investors are pondering: Is Dollarama stock a buy, sell, or hold? Let’s unpack the details.

money goes up and down in balance — Source: Getty Images

The numbers

In its third quarter of fiscal 2025, Dollarama reported sales of $1.6 billion, marking a 5.7% increase from the previous year. This uptick was driven by the addition of 60 new stores over the past year and a 3.3% rise in comparable store sales. Notably, the number of transactions grew by 5.1%, even though the average transaction size dipped by 1.7%. The surge in demand for consumables played a significant role in these figures.

Over the past three years, Dollarama stock soared by over 125%, reflecting its robust business model and consistent growth. However, in the last two months, the stock has experienced a nearly 10% decline, prompting investors to reassess its valuation and future prospects.

However, analysts maintain a “Moderate Buy” consensus rating for Dollarama stock, with an average 12-month price target of approximately $150.09. This suggests a modest upside from current levels, indicating cautious optimism about the company’s trajectory.

Doing well

Dollarama continues its expansion, operating 1,601 stores as of writing, up from 1,541 the previous year. The company has also revised its long-term target, aiming for 2,200 stores in Canada by 2034, an increase from the earlier goal of 2,000 by 2031. Plans are underway to establish a logistics hub in Western Canada to support this growth.

The company’s gross margin stood at 44.7% in the third quarter of fiscal 2025, slightly down from 45.4% the previous year. This decrease is attributed to higher sales of lower-margin consumable products and increased logistics costs. Nonetheless, Dollarama’s ability to maintain strong margins showcases its operational efficiency..

Dollarama stock continues to reward shareholders with regular dividends. The most recent quarterly dividend of $0.092 per share was paid on February 7, 2025, translating to an annualized dividend of $0.37 and a yield of 0.25%. The company’s payout ratio remains conservative, allowing for reinvestment into growth initiatives.

Future outlook

As consumers grapple with rising living costs, Dollarama’s value proposition becomes increasingly appealing. The company’s focus on low-priced essentials positions it well to capture budget-conscious shoppers – a trend that has bolstered its sales and could continue to do so.

Dollarama’s strategic expansion and resilient business model suggest a positive outlook. The planned increase in store count and establishment of a new logistics hub indicate the company’s commitment to meeting growing consumer demand and enhancing operational efficiency.

While Dollarama stock has experienced significant growth, the recent dip presents a potential entry point for investors. However, with a forward price-to-earnings ratio of 31.8, it’s essential to weigh the company’s growth prospects against its current valuation.

Bottom line

Dollarama’s consistent performance, strategic growth plans, and strong market position make it a compelling consideration for investors. However, given its current valuation, potential investors should assess their investment goals and risk tolerance. For those seeking steady growth and exposure to the retail sector, Dollarama stock remains a solid option.