Shares of Dollarama Inc. (TSX: DOL) fell last week despite the discount retail giant posting some strong results. Yet again, the company has demonstrated some strong resiliency despite challenging economic conditions. Here’s why investors may want to consider buying the stock right now.
The company announced its third-quarter earnings last week. Dollarama's revenue reached $1.48 billion, marking a 15% increase compared to the same period last year. This growth is attributed to the opening of 16 new stores and a notable 11.1% rise in same-store sales. The latter, a key retail metric, indicates robust customer retention and successful market strategy adaptation. The company's EBITDA also impressively rose by 24% to $478.8 million, accounting for 32% of total sales. This surge in EBITDA underscores Dollarama's effective operational cost management.
But even though it had a strong performance, the stock fell after posting its quarterly numbers. Prior to that, the stock was up more than 20% this year. However, after the post-earnings dip, the Dollarama’s year-to-date returns are now more modest at just under 14%. Over the past decade, the stock has risen by more than 530%.
Trading at 28 times earnings, the stock isn’t a terribly cheap buy. But it is generating some solid same-store sales growth, and so it may be worth paying a premium for this resilient business. In the long run, this can be an excellent buy as Dollarama is one of the more popular discount retailers in Canada. This dip in price could make now a great time for investors to invest in the stock.
