Shares of Dollarama (TSX:DOL) have been hovering around $190 for the past couple of months. And the company’s latest earnings report didn’t give the stock a boost.
On Aug. 27, the popular Canadian-based dollar store chain reported its second-quarter numbers, and revenue for the period ending Aug. 3 rose by 10% year over year, to $1.7 billion. And its comparable store sales in Canada grew by 4.9%. The company continued to open new stores in the country as its pursuit of expansion remains relentless. Its operating profit also rose by an impressive 14.3% to $483.5 million.
The company’s growth has been impressive, and what’s promising for investors is that Dollarama is just getting started in two new markets: Mexico and Australia. It recently completed an acquisition of The Reject Shop, which is the largest discount retailer in Australia. And it also opened its first Dollarcity location in Mexico.
Investors, however, may have been a bit disappointed with Dollarama’s guidance for the full fiscal year, which calls for comparable store sales growth between 3% and 4%, implying a bit of a slowdown in future quarters. And for a stock that has been doing so well and that’s priced as highly as it is, that simply may not be good enough, especially with concerns mounting about the strength of the Canadian economy, in light of trade uncertainty with the U.S.
Year to date, Dollarama’s stock is up 34% but it trades at a hefty premium of more than 41 times its earnings. While it can still be a good long-term buy, it may have reached a peak, at least for the short term.
