Shares of Dollarama Inc (TSX:DOL) are down more than 16% over the past six months and with the coronavirus creating challenges for companies dependent on China, things may continue to get worse for the popular dollar store.
The company's CEO Neil Rossy had previously admitted that a trade war involving China could have a detrimental impact on the company's operations.
That was before the coronavirus hit which has caused problems for companies needing to source products from China, and it could have a more devastating impact than tariffs or a trade war. The result could be not just a weaker performance from the company in 2020 but a soft forecast as well.
Dollarama's sales have been a concern for investors in the past where a slowing growth rate has weighed on the stock. In fiscal 2019, revenue rose by a rate of 8.7% and the year before that it was up 10.2%.
And without growth, there's not a whole lot of reason to invest in the stock, which pays a nominal dividend that yields 0.4% per year.
Currently trading at around 25 times earnings and a PEG ratio of more than two, it's not a cheap buy, either.
Shares of Dollarama ran into resistance at around $50 per share last year and they've struggled to get back there ever since. The stock reports its earnings next month and a disappointing result or outlook could send it far below $40.
For now, investors are better off waiting until then to see the company's outlook for the year as 2020 could be a bad year to buy the stock.
