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Dollarama Inc (TSE:DOL)
TSX:DOL
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Dollarama
(TSX:DOL)
75Outperform
Positive Factors
Competitive Advantage
Dollarama maintains a compelling value proposition, supporting solid traffic trends despite moderating basket size.
Growth Potential
Dollarcity is anticipated to provide another leg of growth over the medium term for Dollarama.
Negative Factors
Valuation Concerns
Dollarama's premium valuation increases share price volatility, which poses a risk to investors expecting high-end performance.
Dollarama (DOL) vs. S&P 500 (SPY)
Market Cap
$41.88B
Dividend Yield0.25%
Average Volume (3M)794.02K
Price to Earnings (P/E)38.4
Beta (1Y)0.65
Revenue Growth8.24%
EPS Growth17.99%
CountryCA
Employees28,350
SectorConsumer Cyclical
Sector Strength50
IndustryRetailers - Staples
Share Statistics
EPS (TTM)3.93
Shares Outstanding277,177,340
10 Day Avg. Volume901,620
30 Day Avg. Volume794,016
Financial Highlights & Ratios
PEG Ratio2.14
Price to Book (P/B)N/A
Price to Sales (P/S)6.87
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$151.99Price Target Upside1.72% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Dollarama Business Overview & Revenue Model
Company DescriptionDollarama, Inc. engages in the operation of dollar store chain. It offers a broad range of consumer products and general merchandise for everyday use, in addition to seasonal products. The company was founded by Lawrence Rossy in 1992 and is headquartered in Montreal, Canada.
How the Company Makes MoneyDollarama makes money through its retail operations by selling a wide array of consumer products at low fixed price points. Its primary revenue stream is generated from the sales of merchandise in its stores. The company leverages economies of scale and efficient supply chain management to maintain low costs and pass savings onto customers. Dollarama sources products from a diverse network of suppliers, both domestically and internationally, allowing it to offer a broad assortment of goods. The company's strategic store locations and extensive market presence across Canada contribute to its revenue generation. Additionally, Dollarama may engage in partnerships with suppliers to offer exclusive or private label products, enhancing its product offerings and profitability.
Dollarama Financial Statement Overview
Summary
Dollarama exhibits strong financial health with impressive revenue growth and profitability metrics, particularly in the TTM period. While the company benefits from high returns on equity and efficient cash generation, its high leverage and low equity buffer present potential risks. Overall, Dollarama is well-positioned in the staple retail industry, but careful management of debt levels will be crucial for sustained financial stability.Income Statement
Dollarama has shown strong revenue growth, with a TTM revenue increase of 5.2% compared to the previous year. The company maintains robust profitability with a gross profit margin of 42.17% and a net profit margin of 17.85% in the TTM period. Both EBIT and EBITDA margins are healthy, at 25.49% and 30.73%, respectively, indicating operational efficiency. The consistent growth in revenue and profitability metrics suggests a competitive edge in the staple retail sector.85
Very Positive
Balance Sheet
The balance sheet reveals a high debt-to-equity ratio of 3.69, indicating significant leverage, which could pose financial risk. However, the return on equity (ROE) is outstanding at 87.39% for the TTM, driven by strong net income relative to equity. The equity ratio is relatively low at 19.57%, suggesting the company is heavily financed by debt. While profitability is strong, the high leverage warrants careful monitoring.70
Positive
Cash Flow
Dollarama's cash flow from operations is robust, with an operating cash flow to net income ratio of 1.35, indicating efficient cash generation relative to net income. The free cash flow has grown by 2.33% over the previous year, showcasing the company's ability to generate cash after capital expenditures. The free cash flow to net income ratio is commendable at 1.16, reflecting solid cash conversion. However, high financing cash outflows suggest substantial debt servicing, which is a consideration for future liquidity.78
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 6.17B | 5.87B | 5.05B | 4.33B | 4.03B | 3.79B | Gross Profit |
| 2.60B | 2.61B | 2.20B | 1.90B | 1.77B | 1.65B | EBIT |
| 1.57B | 1.50B | 1.19B | 984.62M | 861.00M | 868.14M | EBITDA |
| 1.90B | 1.81B | 1.48B | 1.25B | 1.11B | 1.10B | Net Income Common Stockholders |
| 1.10B | 1.01B | 801.86M | 663.17M | 564.35M | 564.04M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 50.37M | 313.92M | 101.26M | 71.06M | 439.14M | 90.46M | Total Assets |
| 2.18B | 5.26B | 4.82B | 4.06B | 4.22B | 3.72B | Total Debt |
| 1.90B | 4.33B | 4.21B | 3.61B | 3.46B | 3.39B | Net Debt |
| 1.85B | 4.02B | 4.11B | 3.54B | 3.02B | 3.30B | Total Liabilities |
| 2.41B | 4.88B | 4.79B | 4.13B | 3.89B | 3.81B | Stockholders Equity |
| -234.10M | 380.85M | 28.41M | -66.03M | 334.85M | -92.20M |
| Cash Flow | Free Cash Flow | ||||
| 1.28B | 1.25B | 712.22M | 906.37M | 721.25M | 591.89M | Operating Cash Flow |
| 1.49B | 1.53B | 869.04M | 1.07B | 889.08M | 732.51M | Investing Cash Flow |
| -161.41M | -250.87M | -156.55M | -158.67M | -264.52M | -199.31M | Financing Cash Flow |
| -1.78B | -966.62M | -682.29M | -1.28B | -275.88M | -493.10M |
Dollarama Technical Analysis
Positive
149.43
Price Trends
142.00
Positive
143.09
Positive
136.93
Positive
Market Momentum
3.05
Negative
57.08
Neutral
40.99
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:DOL, the sentiment is Positive. The current price of 149.43 is above the 20-day moving average (MA) of 147.21, above the 50-day MA of 142.00, and above the 200-day MA of 136.93, indicating a bullish trend. The MACD of 3.05 indicates Negative momentum. The RSI at 57.08 is Neutral, neither overbought nor oversold. The STOCH value of 40.99 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:DOL.
Dollarama Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | C$20.46B | 22.30 | 13.78% | 1.48% | 1.59% | -1.98% | |
75 Outperform | $41.88B | 38.45 | 142.11% | 0.25% | 8.24% | 17.99% | |
74 Outperform | C$1.61B | 10.45 | 14.17% | 3.22% | 1.78% | 10.47% | |
59 Neutral | $12.41B | 10.34 | 1.32% | 3.61% | 1.65% | -18.04% |
* Consumer Cyclical Sector Average
Performance Comparison
TSE:DOL
Dollarama
149.43
45.19
43.35%
LBLCF
Loblaw Companies
129.72
19.58
17.78%
CJREF
Corus Entertainment
0.06
-0.48
-88.89%
TSE:LNF
Leon's Furniture
23.75
1.94
8.90%
TSE:MRU
Metro Inc.
93.36
20.45
28.05%
CDNAF
Canadian Tire
101.95
7.21
7.61%
Dollarama Earnings Call Summary
Earnings Call Date: Dec 4, 2024 | % Change Since: 0.92% | Next Earnings Date: Apr 3, 2025
Earnings Call Sentiment Neutral
Dollarama's earnings call presented a mixed set of results with notable revenue and store expansion achievements. However, the company faces challenges with decreasing gross margins and cautious consumer spending. Plans for logistics improvements and store growth indicate a positive long-term outlook, though short-term pressures remain.Highlights
Revenue and EPS Growth
Dollarama reported a 5.7% increase in sales over Q3 of fiscal 2024, reaching over $1.5 billion. EPS increased by 6.5% to $0.98 per share.
Expansion of Store Network
The company opened 50 net new stores and plans to open a total of 60 to 70 net new stores by the fiscal year-end. Long-term growth plans were increased to 2,200 stores in Canada by 2034.
Logistics and Operational Improvements
Plans to develop a 2-node logistics operation were announced, with a new Western hub in Calgary aimed at improving service across Canada, targeting significant cost savings.
Dollar City Growth
Dollar City continued its expansion with 18 net new stores, bringing the total to 588 stores in Latin America.
Lowlights
Gross Margin Decrease
Gross margin decreased to 44.7% from 45.4% in Q3 of the previous year, due to stronger sales of consumable products and higher logistics costs.
Consumer Spending Concerns
There is an observed conservative approach to discretionary spending by consumers, impacting sales, particularly in non-essential categories.
Potential Cost Pressures
Future product costs may be impacted by potential tariffs and a weaker Canadian dollar, possibly resulting in margin pressure.
Company Guidance
During the Dollarama Q3 2025 earnings call, guidance highlighted several key metrics and strategic plans. The company reported a 6.5% year-over-year increase in earnings per share (EPS) to $0.98, with comparable store sales rising by 3.3%. Dollarama announced plans to expand its store count target in Canada to 2,200 by 2034, up from the previous goal of 2,000 by 2031, reflecting a strong belief in continued market growth. It also intends to open 60 to 70 new stores by the fiscal year-end, having already opened 50 net new stores. Logistics improvements include a new two-node system, with a Western hub planned for Balzac, Calgary, requiring a capital expenditure of $450 million, excluding land costs. This strategic move aims to enhance agility and efficiency, while maintaining the company's average new store capital payback period of about two years. Dollar City's expansion continued with the opening of 18 new stores, bringing its total to 588, and plans are underway to enter the Mexican market by 2026. Overall, Dollarama remains focused on its growth strategy and maintaining strong shareholder returns.Dollarama Corporate Events
Dollarama Reports Strong Q3 Growth and Expansion Plans
Dec 4, 2024
Dollarama reported a 6.5% increase in diluted net earnings per share for the third quarter of fiscal 2025, highlighting strong financial performance amid cautious consumer spending. The company plans to expand its store network in Canada to 2,200 locations by 2034 and aims to develop a logistics hub in Western Canada.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.