Canadian dollar store operator Dollarama (TSE:DOL) (OTC:DLMAF) reported its Fiscal Q3-2023 results earlier today, sending its stock higher. DOL’s results matched earnings-per-share (EPS) expectations while beating on revenue. Additionally, the company raised its comparable-store sales growth forecast for the fiscal year by 300 basis points to a new range of 9.5% – 10.5% while narrowing its gross margin range to 43.1% – 43.6%. The remaining forecasts remain unchanged from previous quarters.
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Dollarama’s revenue increased to C$1.29 billion (a 14.9% year-over-year increase), which beat expectations of C$1.233 billion. Notably, the company’s comparable-store sales saw 10.8% growth.
Additionally, its diluted earnings per share were C$0.70, in line with the consensus estimate, rising almost 14.8% year-over-year. However, the company’s EBITDA margin was 29.9% compared to 30.9% last year, while operating EBITDA grew 11.3% to C$386.2 million. Similarly, its operating income margin fell from 24.2% to 23.5%, while operating income increased by 11.5%.
Regarding share buybacks, Dollarama bought back C$76.3 million worth of shares in Q3 – or about 0.3% of its current market cap. It also announced the renewal of its buyback program a few months ago, allowing it to repurchase up to 7.5% of its public float from July 7, 2022, to July 6, 2023.
Is Dollarama Stock a Buy, According to Analysts?
According to analysts, Dollarama stock comes in as a Moderate Buy based on seven Buys and three Holds assigned in the past three months. The average DOL stock price target of C$88.57 implies 6.2% upside potential.
The Takeaway
Dollarama continues to release good results while experiencing strong share price momentum. Its recession-resilient business model is faring well in the current environment. Nonetheless, with the stock near an all-time high, it’s important to consider its valuation. Much of its high-quality nature seems to already be priced in by the market, limiting future upside potential.
