DOLLARAMA (DOL-T) top pick from Jason Del Vicario on BNN.ca Market Call Thirst-day Apr 12th @ 1300ET
Dollarama is hands-down the best retailer in Canada and, according to our analysis, Dollarama and Constellation Software are the top two most profitable Canadian companies. If you look at the long-term charts for both, it should come as no surprise they're two of the best performing stocks on the TSX over the past 10 years.
Dollarama is extremely well run, very profitable and still have a long runway of growth. The company is at about 1,100 stores in Canada and see 1,700 as the magic store count domestically. They typically add 60 to 75 stores per year, so they can keep growing in the country for at least the next decade. They've been quiet about their activities in Central and South America, but they now have a partnership boasting over 100 stores.
The company has the option to acquire a majority ownership in Dollar City in February 2019. We’d be very surprised if they don’t do this. They announced the deal in 2013; they are cautious about everything they do and test extensively whether it be product placement, credit card acceptance or foreign market expansion.
Despite all the success, it amazes us that analysts and investors continue to underappreciate Dollarama. Most analysts I read focus on how expensive the stock is. Yes, they trade at 30 times earnings and that’s pricey, but their return on assets is nearly 30 per cent and has been rising. I know people are going to think I’m crazy, but I think they are cheap at $150 per share. They're a top holding of ours and we recently added to our position in the high $150s late March. |
