Dollarama (DOL) AI Stock Analysis

• Market Cap: $43.09B
• Dividend Yield: 0.23%
• Average Volume (3M): 877.95K
• Price to Earnings (P/E): 37.2
• Beta (1Y): 0.59
• Revenue Growth: 9.30%
• EPS Growth: 16.85%
• Country: CA
• Employees: 25,000
• Sector: Consumer Cyclical
• Sector Strength: 64
• Industry: Discount Stores
• EPS (TTM): 4.18
• Shares Outstanding: 277,177,340
• 10 Day Avg. Volume: 1,081,562
• 30 Day Avg. Volume: 877,948
• PEG Ratio: 2.21
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.75
• Price to Cash Flow (P/CF): N/A
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$172.43
• Price Target Upside: 6.61% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 11

Dollarama's strong financial health and positive stock momentum are significant strengths, offset by high leverage and premium valuation. Earnings call insights highlight growth prospects amid operational challenges. The overall score reflects a well-positioned company with a need for careful leverage management.

Positive Factors

Earnings

Expect 6% EBITDA Growth.

Growth Prospects

Dollarcity is expected to provide another leg of growth over the medium term.

Negative Factors

Basket Growth

Basket growth remains negative for a fourth consecutive quarter, which is longer than originally assumed, considering historical steady annual basket growth.

Guidance

Softer guidance for FY25 SSS was a contributor to the stock's weakness, as expectations are now for the midpoint of the range rather than the high-end.

Market Reaction

The stock closed down by more than 5% due to profit taking and lower guidance for SSS, along with margin uncertainty from a new DC ramp.

Dollarama Business Overview & Revenue Model

Company Description

Dollarama Inc. operates a chain of dollar stores in Canada. Its stores offer general merchandise, consumables, and seasonal products. The company also sells its products through online store. As of July 31, 2022, it operated 1,444 stores. The company was formerly known as Dollarama Capital Corporation and changed its name to Dollarama Inc. in September 2009. Dollarama Inc. was founded in 1992 and is headquartered in Montreal, Canada.

How the Company Makes Money

Dollarama 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.

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.

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.

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

• Technical Analysis Sentiment: Positive
• Last Price: 161.74
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: 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 161.74 is above the 20-day moving average (MA) of 152.57, above the 50-day MA of 148.11, and above the 200-day MA of 140.00, indicating a bullish trend. The MACD of 1.49 indicates Positive momentum. The RSI at 62.03 is Neutral, neither overbought nor oversold. The STOCH value of 76.50 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

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MRU	80 Outperform	C$21.23B	22.52	13.78%	1.39%	1.59%	-1.98%
DOL	76 Outperform	$43.09B	37.23	152.86%	0.23%	9.30%	16.85%
LNF	75 Outperform	C$1.54B	10.00	14.17%	3.46%	1.78%	10.47%
Sector *	59 Neutral	$11.48B	10.33	-0.84%	4.02%	1.25%	-16.06%

Dollarama Corporate Events

Dollarama Reports Strong Fiscal 2025 Results and Plans for International Expansion

Dollarama reported strong financial results for the fourth quarter and fiscal year 2025, with a notable increase in sales, earnings, and store count. The company achieved a 14.8% increase in sales for the fourth quarter and a 9.3% rise for the fiscal year, driven by new store openings and comparable store sales growth. Dollarama’s diluted net earnings per share rose significantly, and the company increased its quarterly dividend by 15%. The company also announced plans for international expansion, including the proposed acquisition of The Reject Shop in Australia, highlighting its growth strategy and confidence in its business model.

Dollarama Expands into Australia with Acquisition of The Reject Shop

Dollarama Inc. has announced its acquisition of The Reject Shop, Australia’s largest discount retailer, for approximately A$259 million. This strategic move marks Dollarama’s entry into the Australian market, providing a platform for growth and expansion. The acquisition is expected to have minimal immediate impact on Dollarama’s earnings and financial ratios, while offering potential for significant store network expansion in Australia.