Investing in the stock market is a proven strategy to benefit from the power of compounding and generate long-term wealth. However, just a handful of individual stocks drive the majority of equity market returns over significant time periods. So, it’s essential to identify companies that have a competitive moat and the ability to thrive across economic cycles.
One such TSX 60 stock is Dollarama (TSX:DOL). Valued at a market cap of $50.8 billion, Dollarama stock went public in late 2009 and has since returned 6,520% to shareholders in dividend-adjusted gains.
Dollarama is a discount retailer and offers general merchandise, consumables, and seasonal products. It operates in Canada, Latin America, Colombia, Peru, and Mexico. Dollarama is fairly recession-resistant and has performed well even amid economic downturns.
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The bull case for investing in Dollarama stock
In the fiscal second quarter (Q2) of 2026 (ending in July), Dollarama reported revenue of $1.7 billion, an increase of 10.3% year over year. The top-line growth was driven by a 4.9% increase in same-store sales in the Canadian market.
Canadian same-store sales consisted of 3.9% growth in transaction volume and a 0.9% increase in average transaction size. Strong in-store traffic and demand for consumables drove performance as consumers rely on Dollarama for everyday essentials and discretionary goods.
Management raised guidance expectations, now targeting the upper end of the 3% to 4% full-year same-store sales range, given exceptional first-half performance.
Dollarama’s aggressive store expansion continues ahead of schedule. The retailer opened 27 net new stores in the quarter, bringing the year-to-date total to 49 locations and the Canadian footprint to 1,665 stores.
The discount retailer remains on track to achieve its exceptional target of 70 to 80 net new store openings this fiscal year, a significant increase over previous years. Development of the Western logistics hub near Calgary progresses on plan and on budget, with operations expected to begin by late 2027.
International growth accelerated in Q2, with Dollarcity opening its first location in Mexico, in Guadalajara. Dollarcity now operates 658 stores across five Latin American countries after adding 14 net new locations in the quarter.
The transformational Australian acquisition creates a compelling third growth platform. Dollarama completed its purchase of The Reject Shop, acquiring 395 locations and 5,000 employees.
The company has already begun implementing its methodical multiyear transformation roadmap. Moreover, management is selectively phasing in Dollarama products across categories while converting store layouts and simplifying pricing structures. Dollarama aims to end 2034 with 700 The Reject Shop stores in Australia.
Dollarama’s diversified growth strategy leverages its successful Canadian business model across new geographies while maintaining operational excellence and a value proposition that resonates with cost-conscious consumers worldwide.
Is the TSX 60 stock undervalued?
Dollarama’s growth story is far from over, given the company is forecast to increase revenue from $6.4 billion in fiscal 2025 to $9.7 billion in fiscal 2030. In this period, adjusted earnings are forecast to expand from $4.16 per share to $7.53 per share. Bay Street also forecasts free cash flow to improve from $1.4 billion in fiscal 2025 to $2.2 billion in 2030.
If the TSX 60 stock is priced at 30 times forward free cash flow, which is reasonable, it could gain 30% from current levels over the next three years.
