When it comes to finding high-quality Canadian stocks that are both incredibly defensive and offer rapid but consistent long-term growth potential, there might not be a better choice than Dollarama (TSX: DOL).
Over just the past decade alone, Dollarama stock has earned investors a total return of more than 600%. That’s a compound annual growth rate (CAGR) of 21.4%.
These massive and consistent gains have been supported by a CAGR of 10.7% in its revenue over the last decade, but more importantly, a CAGR of 18.7% in its normalized earnings per share (EPS).
And in today’s market environment, with uncertainty still at elevated levels and the need for investors to be positioned both in defensive stocks and high-potential growth names, there’s no question that Dollarama stock is at the top of many investors’ radars.
So, let’s look at why you should pull the trigger on Dollarama stock today, or why it might be better to wait.
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Why should you buy Dollarama stock right now
Although the price and valuation of the stocks you’re buying matter, a lot of the time, they don’t matter as much as investors think.
In fact, one of Warren Buffett’s most famous investing quotes says, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
This is absolutely the case with Dollarama. The stock will almost certainly never be undervalued. In fact, it can often trade with a growth premium. However, over the long haul, its consistent above-average returns have proven it is deserving of that growth premium.
So, the number one reason to buy Dollarama stock right now is that you’re looking for a high-quality defensive growth stock to own for the long haul.
By committing to Dollarama for the long haul, you mitigate the short-term risk of the stock declining in price.
And the second reason to buy Dollarama now, before the end of the tax-loss selling season, is that Dollarama is the exact type of stock that can see a Santa Claus rally.
So even with Dollarama stock already trading near the top of its 52-week range, it could continue to climb higher throughout December, making now the ideal time to pull the trigger if you have it on your watchlist.
Why you should hold off on buying the discount retailer today
Although price is not as important as investors think, especially if you’re buying a high-quality stock that you plan to hold for the long haul, if you already own Dollarama stock and have been looking to buy more, you can afford to hold off on Dollarama stock for a better entry point.
Dollarama stock is currently trading at a forward price-to-earnings (P/E) ratio of roughly 42 times. That’s nearly the highest it’s ever been and considerably higher than its three-year average forward P/E ratio of 31.2 times.
Furthermore, there are plenty of high-quality stocks you can buy now that are valued fairly or even slightly discounted.
So, if you already own shares of Dollarama, one of the very best stocks on the TSX, then I’d hold off on buying the stock now and wait for a better entry point.
