Dollarama (DOL) AI Stock Analysis

• Market Cap: $49.12B
• Dividend Yield: 0.22%
• Average Volume (3M): 661.70K
• Price to Earnings (P/E): 39.2
• Beta (1Y): 0.41
• Revenue Growth: 9.91%
• EPS Growth: 16.96%
• Country: CA
• Employees: 7,720
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Discount Stores
• EPS (TTM): 1.16
• Shares Outstanding: 276,385,000
• 10 Day Avg. Volume: 591,811
• 30 Day Avg. Volume: 661,702
• PEG Ratio: 1.93
• Price to Book (P/B): 32.39
• Price to Sales (P/S): 6.00
• P/FCF Ratio: 27.54
• Enterprise Value/Market Cap: 1.17
• Enterprise Value/Revenue: 8.62
• Enterprise Value/Gross Profit: 18.37
• Enterprise Value/Ebitda: 29.99
• 1Y Price Target: $204.88
• Price Target Upside: 15.97% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 9

• Rating: 71 Outperform
• Price Target: C$201.00 ▲(13.77% Upside)

Dollarama's overall stock score reflects its strong financial performance and positive earnings call, highlighting robust profitability and strategic international expansion. However, the high P/E ratio and bearish technical indicators suggest caution. The company's high debt level and recent decline in free cash flow growth are also areas to monitor.

Positive Factors

International Expansion

The international expansion into Mexico and Australia represents a strategic growth opportunity, diversifying revenue streams and reducing reliance on the Canadian market. This long-term initiative could enhance Dollarama's market position and drive sustained revenue growth.

Strong Same-Store Sales Growth

Consistent same-store sales growth indicates strong customer loyalty and effective store management. This trend supports Dollarama's competitive position in the Canadian market and suggests continued revenue stability.

Revenue and Earnings Growth

The robust growth in revenue and earnings reflects Dollarama's effective business model and operational efficiency. This financial strength underpins the company's ability to fund expansions and manage economic uncertainties.

Negative Factors

High Debt Levels

The high debt levels could pose a risk to Dollarama's financial stability if not managed carefully. This reliance on debt financing may limit flexibility and increase vulnerability to interest rate changes.

Decline in Free Cash Flow Growth

A decline in free cash flow growth could impact Dollarama's ability to invest in growth opportunities and manage debt. Sustained cash flow is crucial for funding operations and expansions without increasing financial risk.

Higher SG&A Costs

Rising SG&A costs, particularly from international operations, could pressure profit margins. Managing these costs is essential to maintain profitability and ensure the success of international expansion efforts.

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 January 30, 2022, it operated 1,421 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 generates revenue primarily through the sale of a wide assortment of products at fixed low prices. The company's revenue model is based on high-volume sales, low operating costs, and a carefully managed supply chain. Key revenue streams include in-store sales from its extensive product range and seasonal merchandise. Dollarama also benefits from private label products, which help to enhance profit margins. The company maintains strong relationships with suppliers to negotiate favorable pricing, enabling it to keep costs low. Significant factors contributing to its earnings include its widespread store presence across Canada, a growing customer base, and the strategic expansion of its product offerings to meet diverse consumer needs.

Dollarama Financial Statement Overview

Summary

Dollarama exhibits strong financial performance with robust profitability and efficient operations, as evidenced by its high profit margins and return on equity. While the company maintains a high level of debt, it effectively generates returns on its equity. Cash flow generation remains healthy, although the recent decline in free cash flow growth warrants attention.

Income Statement

Dollarama demonstrates strong profitability with a consistent increase in gross and net profit margins over the years. The TTM gross profit margin stands at 45.32%, and the net profit margin is 18.79%, indicating efficient cost management and strong bottom-line performance. Revenue growth is steady, with a TTM growth rate of 2.46%, reflecting resilience in a competitive market. The EBIT and EBITDA margins are robust at 27.56% and 33.88%, respectively, showcasing operational efficiency.

Balance Sheet

The balance sheet reveals a high debt-to-equity ratio of 3.56 in the TTM, indicating significant leverage, which could pose a risk if not managed carefully. However, the return on equity is impressive at 99.03%, suggesting that the company is effectively using its equity base to generate profits. The equity ratio is relatively low, highlighting a reliance on debt financing.

Cash Flow

Cash flow analysis shows a decline in free cash flow growth at -23.4% in the TTM, which could be a concern if it persists. However, the operating cash flow to net income ratio is strong at 1.76, indicating healthy cash generation relative to net income. The free cash flow to net income ratio is also solid at 0.85, suggesting that a significant portion of earnings is converted into free cash flow.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	6.69B	6.41B	5.87B	5.05B	4.33B	4.03B
Gross Profit	3.14B	2.89B	2.61B	2.35B	2.05B	1.91B
EBITDA	1.92B	1.70B	1.52B	1.24B	1.07B	999.30M
Net Income	1.26B	1.17B	1.01B	801.86M	663.17M	564.35M
Balance Sheet
Total Assets	7.68B	6.48B	5.26B	4.82B	4.06B	4.22B
Cash, Cash Equivalents and Short-Term Investments	687.23M	122.69M	313.92M	101.26M	71.06M	439.14M
Total Debt	5.56B	4.71B	4.33B	4.22B	3.62B	3.46B
Total Liabilities	6.23B	5.29B	4.88B	4.79B	4.13B	3.89B
Stockholders Equity	1.46B	1.19B	380.85M	28.41M	-66.03M	334.85M
Cash Flow
Free Cash Flow	1.36B	1.33B	1.18B	670.81M	929.11M	749.04M
Operating Cash Flow	1.58B	1.54B	1.43B	804.86M	1.07B	889.08M
Investing Cash Flow	-410.05M	-224.14M	-250.87M	-156.55M	-158.67M	-264.52M
Financing Cash Flow	-755.28M	-1.51B	-966.62M	-618.11M	-1.28B	-275.88M

Dollarama Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 176.67
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:DOL, the sentiment is Negative. The current price of 176.67 is below the 20-day moving average (MA) of 184.94, below the 50-day MA of 188.47, and above the 200-day MA of 168.47, indicating a neutral trend. The MACD of -2.78 indicates Positive momentum. The RSI at 27.97 is Positive, neither overbought nor oversold. The STOCH value of 10.31 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:DOL.

Dollarama Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ATZ	80 Outperform	$9.32B	39.53	23.27%	―	22.57%	197.68%
LNF	75 Outperform	C$2.02B	12.56	14.38%	2.90%	0.57%	8.54%
CTC.A	73 Outperform	$9.38B	12.30	13.84%	4.19%	0.05%	99.91%
CTC	72 Outperform	$9.46B	19.56	13.84%	2.64%	0.05%	99.91%
DOL	71 Outperform	$49.12B	39.23	94.57%	0.22%	9.91%	16.96%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
PET	56 Neutral	C$2.43B	26.33	126.66%	1.31%	5.18%	17.66%