Dollarama (TSX:DOL) is a Montreal-based company that operates a chain of dollar stores across Canada. The dollar store retail industry has significantly broadened its client base since the Great Recession. Today, I want to look at three reasons Dollarama is worth buying in the first days of the 2023 summer season. Letâs dive in.
Dollarama is a top defensive stock on the TSX
Investors have been challenged by volatility on the TSX Index in recent months. In this environment, Canadians might want to target defensive stocks like Dollarama. This defensive stock has outpaced the performance of the broader TSX over the past decade. Moreover, like grocery retail stocks, dollar store chains have attracted Canadians who are eager to stock up on essentials without paying premium prices.
Canadian investors who are seeking out dependability in this volatile market can trust Dollarama at the midway point in 2023. The S&P/TSX Composite Index was down triple digits in early afternoon trading at the time of this writing on Friday. Meanwhile, Dollarama stock was up marginally during the same trading session. In a nutshell, this illustrates the advantage of this top defensive stock in the early summer season.
Investors should be pleased with this companyâs recent earnings
This company released its first-quarter fiscal 2024 earnings on June 7. Dollarama reported sales growth of 20% year over year to $1.29 billion. Sales growth was propelled by total store growth over the past 12 months as well as a jump in comparable store sales. Meanwhile, comparable store sales climbed 17% compared to growth of 7.3% in the first quarter of fiscal 2023.
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Dollarama last posted EBITDA growth of 22% to $366 million, which represented 28% of sales. The company reported net earnings of $179 million, or $0.63 per diluted share — up from $145 million, or $0.49 per diluted share, in the previous year.
Dollarama also provided guidance for the remainder of the 2024 fiscal year. The company is projecting new store openings between 60 and 70. Moreover, Dollarama forecasts comparable store sales growth between 5% and 6% and capital expenditures between $190 million and $200 million.
Dollarama stock offers solid value right now
Shares of Dollarama have climbed 5.1% month over month as of early afternoon trading on Friday, June 23. This defensive stock is now up 8.6% so far in 2023. Its shares have climbed 16% in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
Dollarama stock currently possesses a solid price-to-earnings ratio of 29, which puts this stock in solid value territory at the time of this writing. The stock also offers a quarterly dividend of $0.071 per share. That represents a modest 0.3% yield. The Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. Dollarama threatened to climb into technically overbought territory earlier this month but has since let off steam that kept it in neutral territory.
Before you consider Dollarama, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in May 2023… and Dollarama wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 23 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 5/24/23
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
How to Invest in Retail Stocks When Everyoneâs Talking About a Recession
2 Top Stocks to Buy Without Hesitation in June 2023
Navigating the Rate Tide: 4 Companies Set to Outperform as Interest Rates Rise
3 Canadian Stocks That Can Stand Up to Inflation
5 Canadian Stocks for Beginners in June 2023
Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.