Dollarama Stock: Huge Value or About to Bomb?

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In times of economic uncertainty and high inflation, investors seek refuge in stable, value-driven stocks. Dollarama (TSX:DOL), a Canadian dollar store giant, stands out as a compelling option for those looking to protect their investments. With a rich history, recent strategic moves, and the approval of analysts, Dollarama stock proves to be a strong investment choice.

Why Dollarama stock?

Dollarama stock, headquartered in Mount Royal, Quebec, has a fascinating history that spans over a century. The roots of this retail powerhouse date back to 1910 when Salim Rassy, a Lebanese immigrant, founded the first all-dollar store in Montreal. The chain grew under the leadership of Salim’s son, George, and eventually, Larry Rossy took the reins in 1973. By 1992, Dollarama stock was born as the flagship dollar store, replacing the Rossy S Inc. brand. This strategic shift marked the beginning of the company’s remarkable journey.

Dollarama stock continued to expand, reaching 1,000 stores in 2015. In 2004, 80% of the company was sold to Bain Capital, a private equity fund based in Boston, Massachusetts, for $850 million. This move not only demonstrated the company’s value but also its potential for growth and profitability.

Recent moves

Today, Dollarama stock operates 1,507 locations across Canada, offering customers a wide range of consumable products, general merchandise, and seasonal items at fixed price points of up to $5. Furthermore, Dollarama stock holds a 50.1% interest in Dollarcity, a rapidly expanding Latin American value retailer with 448 stores in El Salvador, Guatemala, Colombia, and Peru.

This strategic investment in Dollarcity diversifies Dollarama’s revenue streams and provides access to emerging markets. It positions Dollarama as a key player in the international value retail sector, indicating a forward-thinking approach to growth.

Dollarama stock is now up 16% in the last year and up 2,867% since coming on the market. And this could certainly continue in the future.

Analysts on board

Analysts are optimistic about Dollarama stock’s future. Analysts expect strong second-quarter 2024 same-store sales growth, projecting earnings per share of 77 cents, a 10-cent increase year over year. This growth is driven by a 10.5% increase in same-store sales, aligning with consensus projections and management’s expectations.

Analysts also anticipate Dollarama stock raising its full-year 2024 same-store sales growth guidance to 8%, further solidifying its performance. Additionally, they foresee a 20 basis point year-over-year improvement in gross margin due to lower logistics costs and scaling. Despite challenges, Dollarama remains within its guidance range, fostering investor confidence.

With a “buy” rating and a $93 target for Dollarama shares, analyst endorsements underscore the stock’s appeal. The average analyst target of $91.32 is also in alignment, reflecting a consensus view of Dollarama’s strength.

Bottom line

In an environment where investors are increasingly concerned about inflation eroding the value of their portfolios, Dollarama stock emerges as an attractive choice. Its rich history and steady growth over the years, coupled with recent strategic moves into international markets, position the company for long-term success.

Analyst consensus and endorsements further bolster Dollarama stock’s status as a strong investment. With a focus on value-driven retail, Dollarama stock is well positioned to thrive in uncertain economic times. As consumers continue to seek value, Dollarama’s commitment to providing quality products at affordable prices is a recipe for success.

Investors looking to safeguard their assets during periods of high inflation should consider Dollarama stock as a reliable option. Its resilient business model, strategic expansion, and analyst approval make it a compelling choice for those seeking stability and growth in their investment portfolios. Dollarama’s future looks promising, and it’s a stock that deserves a closer look from investors looking for protection in turbulent economic waters.

The post Dollarama Stock: Huge Value or About to Bomb? appeared first on The Motley Fool Canada.

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  • Better Buy: Dollarama Stock or Canadian Tire Corporation?

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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