As recession looms over the Canadian stock market, it is safe to find and invest in growth stocks with defensive traits. Investing in retail stocks, in such a scenario, can be rewarding.
Dollarama (TSX:DOL), the largest Canadian dollar store retail chain, has the largest market cap ($26.6 billion) among Canadian retail stocks. The firm has recently made the headlines by topping analysts’ estimates in the company’s second-quarter (Q2) financial results.
Let’s find out if the stock can shield investors’ assets against recession and if it can hit $100 per share before the end of the year.
Highlights of Dollarama Q2 financial report
Reuters analysts’ expectations about Dollarama stocks for Q2 was $0.77 on sales of $1.4 billion. The company has certainly exceeded expectations and has shown significant growth. Earnings per share and revenue increased by 30.3% and 19.6%, respectively.
Following the hike in its revenue, the company has also increased its dividend payment, pleasing the investors with $0.078 per share, a 28% increase from the previous dividend.
According to a statement by Dollarama chief executive officer Neil Rossy, the driving factor behind this unexpected performance has been a growing number of customers seeking affordable products.
Dollarama experiencing a renaissance after recession
Dollarama is one of the top defensive stocks and is preferred by many investors. Do you know why?
The stock has a consistent record of value performance that is unmatched by its peers. The stock is up by 19%, with a monthly climb of 10% of its shares. Dollarama has managed to achieve EBITDA (earnings before interest, taxes, depreciation, and amortization) growth of 23%, jumping to $457 million for the Fiscal Year 2024.
Now, coming to the question of whether DOL can reach $100 anytime soon, the answer would be yes.
The consensus analyst price target for DOL stock currently sits just a hair above this level, at $101.46 per share. Indeed, this figure seems pretty much achievable, considering the stock has a price-to-earnings ratio of 27.2 times, which isn’t outrageous. Accordingly, to achieve the price target, the ratio should be 27.5 times. Hence, Dollarama simply has to maintain its performance to reach $100 by the end of the year.
Bottom line
Dollarama stock might seem a little bit expensive to a lot of investors, but there are reasons why investors seeking defensive options in this market look to this stock. Indeed, with the company’s revenue expected to grow by 78.86% by 2024, this is more of a growth stock than a dividend gem worth considering.
For those seeking capital appreciation in the retail space, Dollarama certainly looks enticing here.
