Should You Investigate Dollarama Inc. (TSE:DOL) At CA$69.02?

Dollarama Inc. (TSE:DOL) saw a significant share price rise of over 20% in the past couple of months on the TSX. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Dollarama’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Dollarama

What is Dollarama worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.98% above my intrinsic value, which means if you buy Dollarama today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$62.76, there’s only an insignificant downside when the price falls to its real value. In addition to this, Dollarama has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Dollarama?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 34% over the next couple of years, the future seems bright for Dollarama. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? DOL’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on DOL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Dollarama as a business, it's important to be aware of any risks it's facing. For example - Dollarama has 2 warning signs we think you should be aware of.

If you are no longer interested in Dollarama, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.