Dollarama (DLMAF) is one of many Canadian stocks worth going north of the border for, if you're on the hunt for a better bang for your buck. Undoubtedly, there's no shortage of dollar-store stocks in the U.S.
Still, in terms of growth in the retail space, I think it's pretty tough to stack up against a name that's been one of Canada's best performers over the past 10 years. I am bullish on the stock.
Although shares of the Canadian giant have since stalled, crashing and recovering constantly over the past three years, I think the stock could have the stage set for a breakout rally in the years to come. (See DLMAF stock charts on TipRanks)
Dollarama's Renewed Growth Plan
Dollarama stock may not seem like a great value, given its 30.1 trailing price-to-earnings ratio. With COVID-19's negative impact poised to dampen over the next year, though, the stock may very well be a bargain.
In essence, the P/E ratio does not tell the full story. Dollarama is moving back into growth mode, with a long-term target of opening around 2,000 new stores over the next decade. If the next decade really is the so-called roaring '20s, then Dollarama's domestic expansion plans could fuel the stock's next leg higher.
Still, don't expect the same magnitude of momentum that has been enjoyed by Dollarama shareholders over the past decade.
While there is still plenty of gas left in the tank, the Montreal-based discount retailer is now far more mature. It's a $13.9-billion company now, and naturally, growth will be harder to come by than when it was an up-and-coming mid-cap.
Don't Discount Dollarcity's Long-Term Growth
It's not just Dollarama's Canadian expansion plans that have investors so bullish on the name. The company's partial stake in Dollarcity provides a very interesting growth outlet in the fast-growing Latin American market.
Ultimately, Dollarama's foray into new markets with its stake in Dollarcity should enhance the company's overall risk/reward. Dollarcity complements the Canadian business very well, and appears to be a prudent investment to resist the growth deterioration that naturally kicks in as companies age.
Only time will tell if Dollarama's venture into new markets will help it continue to grow. As COVID pressures, which weighed quite heavily on emerging markets, decrease, it's going to back to full-growth mode for Dollarama stock.
Wall Street's Take
According to TipRanks’ analyst rating consensus, Dollarama comes in as a Moderate Buy. Out of seven analyst ratings, there are three Buys and four Holds.
The average DLMAF price target is $50.39. Analyst price targets range from a low of $45.13, to a high of $59.
Bottom Line
Dollarama stock looks to be on the cusp of a multi-year breakout.
With plenty of promising growth levers and catalysts, it may be worth venturing to the TSX Index for the name, if you seek growth.
Disclosure: At the time of publication, Joey Frenette did not have a position in any of the securities mentioned in this article
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