What Recent Gains Mean for Dollarama Shares After a 33% Rally in 2025

Thinking about what to do with Dollarama stock? If so, you are far from alone. This household name has been on quite a run, clocking a 33.0% gain so far this year. That momentum is even more striking if you zoom out, with the stock boasting a massive 142.7% return over three years and 271.5% over the last five. While shares dipped slightly in the last month, down 3.6%, investors seem largely undeterred and continue to view Dollarama as a resilient player in a changing retail landscape.

Much of this optimism seems rooted in the company’s ability to thrive during both economic upswings and downturns, as consumers seek value and affordable products. Broader market developments, including increased interest in defensive stocks, may partly explain why Dollarama has been such a standout in recent quarters. Investors have been flocking to companies seen as insulated from discretionary cutbacks.

But with growth like this, the real question becomes: Is Dollarama’s stock now overvalued, or does it still offer upside? Here, the numbers start to get interesting. If we look at valuation, Dollarama scores a 0 out of 6. This means it currently does not check the box as undervalued by any of the main metrics we track.

Before you make any decisions, let’s walk through how Dollarama stacks up across the most common valuation methods. We will then explore a more insightful way to think about the company’s real worth near the end of this article.

Dollarama scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Dollarama Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) valuation estimates a company’s intrinsic worth by projecting its future cash flows and discounting them to their present value. This method helps investors gauge what a business is fundamentally worth if today’s shareholders owned all future profits.

For Dollarama, current Free Cash Flow stands at CA$1.42 billion. Analysts project cash flow expansion in the coming years, expecting it to grow to CA$2.12 billion by 2029. These projections are initially based on five years of analyst estimates and are then extrapolated further by Simply Wall St for a 10-year horizon, reflecting both growth and normalization over time.

Based on this model, Dollarama’s estimated fair value is CA$181.19 per share. With the current share price slightly above this level, the DCF analysis suggests the stock is about 2.9% overvalued.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Dollarama.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Dollarama's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Dollarama Price vs Earnings

The Price-to-Earnings (PE) ratio is the preferred valuation metric for profitable companies like Dollarama. It offers a straightforward way to understand how much investors are paying for each dollar of earnings and is widely used because earnings are a key driver of long-term stock performance.

A "normal" or "fair" PE ratio depends not only on current profits but also on a company’s growth prospects and risk profile. Faster-growing or lower-risk companies typically command higher PE ratios, whereas slower-growing or more uncertain businesses trade at lower multiples.

Dollarama currently trades at a PE ratio of 40.7x. This is significantly higher than the Multiline Retail industry average of 22.3x and the peer group average of 20.4x. On the surface, this signals the stock is priced well above its sector.

However, Simply Wall St’s “Fair Ratio” provides a more complete picture. This proprietary metric estimates what Dollarama’s PE should be, after factoring in industry, profit margins, earnings growth expectations, market cap, and risk. As a result, it is more reflective of the company’s true potential and business quality than a simple peer comparison.

For Dollarama, the Fair Ratio stands at 31.3x. Since the stock’s actual PE of 40.7x is notably higher, the shares look overvalued using this approach.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Dollarama Narrative

Earlier, we mentioned there’s an even better way to understand valuation. Let’s introduce you to Narratives. Rather than just relying on ratios or analyst forecasts, Narratives let you bring your own perspective to the numbers. You can weave together a company’s story, your financial assumptions about its future (like revenue, profit margins, and PE ratio), and a resulting fair value. Narratives act as personalized forecasts that are easy to create and adjust directly on Simply Wall St’s Community page, which is trusted by millions of investors.

With Narratives, you get a clear, visual way to compare your estimated Fair Value with the current market price, helping you decide whether you think a stock is a buy, hold, or sell. What makes Narratives unique is that they automatically update as fresh news or earnings come in, so your views can always adapt with the latest data.

For example, some investors think Dollarama’s aggressive international expansion will unlock new markets and justify a higher future share price, while others worry about risks like market saturation and set lower value targets. Depending on your view, your Narrative could lead to a Fair Value anywhere between CA$115 and CA$223 per share.

Do you think there's more to the story for Dollarama? Create your own Narrative to let the Community know!

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.

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