Canadian retail giant Dollarama (TSX:DOL) is having an uncharacteristically bad year on the markets. Since January, its shares have tumbled by 18%. The year before, they were performing exceptionally well, rising by over 46%.
On Monday, the stock closed at just over $168, trading just a few dollars away from its 52-week low of $166. The company has earnings coming up, set to release its latest quarterly results on Wednesday. They will be for the second quarter of fiscal 2027, covering the three-month period up until Aug. 2. How the company did during the period will likely have a big impact on where the stock goes in the latter part of the year, and could dictate whether it recovers or ends up falling to a new low.
Dollarama's stock is still up 200% over the past five years and a pullback may have been overdue given its inflated valuation; even with the decline this year, it's trading at 35 times its trailing earnings. That's a bit of a steep multiple for a retail stock. Unless it delivers strong numbers for Q2, it could be heading lower.
When it last reported earnings in June, the company's comparable store growth rate in Canada was 5.6%, but it forecasted a slowdown with its full-year guidance calling for an organic growth rate between 3% and 4%.
The company has expanded into Latin America and Australia in recent years and investors may be looking for evidence that those investments are paying off, in light of its heightened valuation. I'd hold off on buying the stock until after it reports earnings, as Dollarama still doesn't look all that cheap to buy right now.
