Amid optimism about a potential de-escalation of the Iran conflict – following encouraging remarks from US President Donald Trump and Iranian President Masoud Pezeshkian – global equity markets rose yesterday, with the S&P/TSX Composite Index climbing 2.6%. However, despite this rebound, the Canadian benchmark index remains about 5.1% below its recent highs.
Against this backdrop of broader market weakness, several high-quality companies have come under pressure in recent months. This pullback presents a compelling opportunity for investors to accumulate fundamentally strong stocks at more attractive valuations. With solid business models, promising growth prospects, and discounted share prices, these two companies stand out as attractive buys right now.
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Dollarama
Dollarama (TSX:DOL) is a leading Canadian discount retailer that has come under pressure after reporting a mixed fourth-quarter performance last month. The company posted revenue of $2.1 billion, up 11.7% year over year, driven by contributions from its 402 Australian stores – acquired last June – along with the addition of 75 new stores in Canada over the last four quarters and modest same-store sales growth of 1.5%. However, the same-store sales growth fell short of analysts’ expectations of 2.6%, with management citing unfavourable weather and calendar shifts as key headwinds.
Despite solid top-line growth, profitability showed some strain. Operating income rose 13.3%, but operating margins declined by 190 basis points due to lower gross margins and higher selling, general, and administrative (SG&A) expenses. Still, adjusted earnings per share (EPS) increased 2.1% to $1.43, slightly ahead of the consensus estimate of $1.41.
Looking ahead, Dollarama’s fiscal 2027 guidance appears to have unsettled investors. The company expects to return to its historical pace of opening 60–70 stores annually and forecasts same-store sales growth of 3–4%, which is below market expectations. It also plans capital expenditures of $420–470 million, with the midpoint representing a significant year-over-year increase, l argely due to investments in a new logistics hub in Western Canada. These factors have contributed to the recent weakness in the company’s share price.
However, Dollarama’s long-term growth story remains compelling. The retailer plans to expand its Canadian store network from 1,691 locations to 2,200 by fiscal 2034, while its Australian footprint could grow from 401 to 700 stores. Additionally, contributions from its investments in Central American Retail Sourcing (CARS) and Inversiones Comerciales Mexicanas (ICM) should support future growth. Backed by these expansion initiatives, Dollarama remains well-positioned for sustained growth. The company also rewarded its shareholders by recently raising its quarterly dividend by 13.4% to $0.12 per share.
Waste Connections
Another stock that has seen notable selling pressure is Waste Connections (TSX:WCN), whose share price is down 19.5% from its 52-week high. The non-hazardous solid waste management company has faced headwinds over the past year, including weaker recycled commodity prices, reduced renewable energy credits from landfill gas, softer waste volumes, and delays in reopening its Chiquita Canyon landfill.
Despite these near-term challenges, WCN’s long-term outlook remains solid. The company continues to grow through both organic initiatives and strategic acquisitions. Following the launch of five renewable natural gas (RNG) facilities, it is further expanding its footprint, with additional projects expected to come online by the end of this year. Management also plans to commission a new state-of-the-art facility next year, which could support future growth.
Backed by reliable cash flows and a healthy balance sheet, WCN is well-positioned to pursue aggressive acquisitions. The company has identified several private businesses that could collectively add around $5 billion in annualized revenue. At the same time, it is leveraging technology, including AI-driven solutions, to drive operational efficiency and productivity. Efforts to improve employee engagement and safety are also underway, which should help reduce voluntary employee turnover and strengthen customer retention.
Considering its resilient business model, expansion strategy, and improved operational efficiency, WCN appears undervalued at current levels and presents an attractive buying opportunity for long-term investors.
