Dollarama Inc. (DOL.TO)

DOL continues to execute extremely well and we think it is a good stock in the current uncertain environment. Its last quarter was solid and it increased its same store sales outlook to 10%+, which is still likely conservative giving it has been tracking higher than that recently. 
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It is fine for the Canadian retail space and if the economy slows there might be more traffic to its stores. She prefers Dollar Tree in the U.S. It is more volatile but trades at a discount to Dollarama.

Phenomenal. Well managed, continues to execute. Trend toward dollar stores with inflation being high. Continues to expand, gain market share, and increase geographic footprint. Wait for a pullback, buy, and then keep holding.

The chart shows higher highs and higher lows. A fine chart. If it holds its trend line, it's a buy.

High valuation reflects its execution of a very successful strategy. She own DLTR instead.

Good business model during recessionary times.
Large revenue growth and excellent stock performance.
Excellent retail footprint.
Very good management team.
Sales growth in double digits.

Let’s start with this homegrown success story. Since February 2020, DOL has moved from $39 to $84 currently, close to 52-week highs. DOL has beaten or met its last four quarters, it continues to expand, it trades at a low 0.72 beta at 30.41x earnings. That’s lower than the 34x in 2022, but lately has crept above its 5-year average of 28.23x.  Read The dollar wars for our full analysis.

Has done. They continue to open new stores with some international presence. Inflation and a possible recession could drive more foot traffic. Highly defensive. She owns Dollar Tree in the US instead which offers more upside as they raise prices and add products. DOL also trades at a premium to peers.

Although he has trimmed a bit, it is still a core position. It has always done well with growth, etc., and share buybacks. Very expensive at mid 20's to low 30's times earnings.

Both are timely, great secular growers. If he really had to choose, he'd pick ATD because of the more attractive valuation of 15-16x. DOL is at a mid-high 20s multiple, but it's justifiable because it has a faster organic growth rate. ATD has a more under-levered balance sheet, a capable serial acquirer. ATD announced significant transaction last week, increases presence in Europe. Good deal, high single-digit accretion, manageable financially, more to come.

DOL’s chart shows an upward trend in the past 12 months from $66.66 to peak at $85.88, with higher highs and higher lows. Currently, DOL is trading right at its 50- and 200-day moving averages in the ballpark of $79-80. The current PE is 31x, so DOL is trading above its five-year median average of 28.95x and mathematical average of 28.39x. Shares are now toppy, so buy this on a pullback. DOL pays only a 0.28% dividend yield, but trades at a stable 0.75 beta. Yes, debt is significant, but so is cash flow. Read: Buying pullbacks: DOL, UNH, Linde for our full analysis.

It grinds out profits year in year out, and grows at double digits. They will expand from 1,500 stores to 2,000 over the decade in high-traffic locations and moderate costs. Same-store sales growth will continue. They have a controlling interest in a Latin American joint venture, Dollar City, which extends growth in that faster-growing region.

On several metrics, DOL trades close to the upper end of its 3-year valuation range. 
The range is pretty tight to begin with, with forward P/E ratios in the 24x and 29x range, excluding the pandemic crash ratios. 
Price to-sales ratio has ranged from 3.4x to 4.7x. 
The current multiples are 26.0x forward earnings and 4.2x forward sales. 
Debt is high, no doubt, but debt servicing capabilities are high. EBIT to interest expense stands at 69.6x. 
Having said that we would be okay with some profit-taking. 
We still like it a lot, but if other sectors start performing it could see some selling rotation. 
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With inflation, many consumers are being driven into dollar stores. High quality, good returns. Share price at multi-year highs, 33x earnings. TSX is at 13x. Very levered balance sheet. Take profits. "Be fearful when others are greedy." See his Top Picks.