When it comes to finding the highest-quality stocks on the TSX, few stocks can even come close to competing with Dollarama (TSX:DOL).
Over the last decade, it has been one of the best-performing stocks in the entire Canadian market, consistently growing revenue, expanding its store base, and delivering massive returns to shareholders along the way.
In fact, it has earned investors a total return of 675% over the last decade, demonstrating exactly what a high-quality growth stock looks like.
That’s why owning the best businesses is so important, especially if you’re investing for the long haul. Companies with strong management, a scalable business model, and consistent execution tend to keep winning over time.
So, although these top-notch stocks rarely come cheap, paying a premium for quality is often worth it, because the long-term gains more than make up for the short-term valuation.
Dollarama is one of those elite names. It may not always or ever be considered “undervalued” in the traditional sense, but it continues to grow earnings, expand margins, and prove that its business is built for the long run.
So, if you’re looking for a stock to buy now and hold for years, and that can help compound your capital rapidly in the background, Dollarama deserves serious consideration.
Here are three reasons why this incredible growth stock is one of the best stocks on the TSX to buy today.
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Dollarama is the perfect defensive growth stock
What makes Dollarama so unique is that it’s both a growth stock and a defensive stock, something you rarely find in the same company.
Its low-cost, value-focused discount retailer model means it consistently attracts price-conscious consumers. And when the economy takes a hit, even more shoppers flock to its stores looking to save money on everyday essentials.
That counter-cyclical demand gives Dollarama a built-in safety net during downturns, which is why its performance often strengthens when other retailers are struggling.
However, it’s not just a stock that rallies in recessions. In fact, even in strong economic conditions, Dollarama continues to grow consistently by expanding its store count, increasing same-store sales, and maintaining strong margins.
This ability to thrive in any economic environment makes Dollarama one of the very best stocks on the TSX.
Dollarama has an impressive and long track record of earning its growth premium
Although Dollarama has been firing on all cylinders in recent years, it’s not just a recent success story. In fact, Dollarama has been one of the top growth stocks on the TSX for well over a decade.
Since going public, it has consistently delivered double-digit earnings growth, expanded its store count, improved margins, and steadily increased its free cash flow.
Because of that consistent and rapid growth, especially in its earnings, Dollarama almost always trades at a premium valuation.
That’s why waiting around for Dollarama to become “cheap” often means missing the boat. For long-term investors, the key isn’t finding the absolute lowest price; it’s buying a high-quality business that can keep compounding at a reasonable price. And Dollarama has shown time and again that it’s more than deserving of its growth multiple.
The stock continues to have significant growth potential in the coming years
Although Dollarama is already one of the top-performing stocks in Canada, it still has a tonne of growth potential in both the near and long term.
For example, it’s still opening 60 to 70 new stores every year in Canada and has a long-term target of reaching 2,000-plus locations. That steady expansion alone gives it a clear runway for continued growth for years to come.
In addition, through its investment in Dollarcity, it now has a strong and growing presence in Latin America. Dollarcity is already growing at an impressive pace, and its store count is expected to more than double over the coming years. On top of that, Dollarama is expanding into a third growth market: Australia.
So, although Dollarama stock is expensive and it has already gained more than 36% year-to-date, there’s no question that it’s one of the best long-term growth stocks you can buy on the TSX. And because it operates a defensive business model, you can have the confidence to own it in any economic environment.
