Canadian dollar store chain Dollarama Inc. (TSX: DOL) has been a popular choice among investors in recent years due to its strong financial performance and growth prospects.
One of the main factors driving Dollarama’s success is its business model, which is focused on offering low-priced goods that appeal to value-conscious consumers. This has allowed the company to capture a significant share of the discount retail market in Canada.
Although the stock is up +$14.41 (22.42%) over the last year and a further +$27.67 (54.24%) past five years, it hasn’t had the best start to 2023. DOL stock is down -$1.18 (-1.48%) year-to-date at the time of publication despite the market turning favorably for a number of equities.
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A combination of multiple trend lines across various time frames forms a support zone ranging from $78.29 to $78.67. At the same time, the first resistance area ranges from $78.76 to $80.60, formed by a combination of multiple trend lines.
DOL is currently showing a bear flag pattern, which occurs when prices pull back slightly after a strong move down. This may present a good short opportunity. Finally, DOL is currently trading in the middle of its 52-week range, which is in line with the S&P500 Index, which is also trading in the middle of its range.
DOL technical analysis
On Wall Street, the consensus recommendation is a ‘buy’ from 13 analysts. Significantly, four industry experts recommend a “hold.” Elsewhere, nine analysts suggest a “strong buy” rating.
Based on analyst stock evaluations for DOL over the last three months, the average price forecast for the next 12 months is $90.58; the target indicates a 15.13% upside from its current price. Interestingly, the highest price target over the next year is $95, +20.74% of its current price.
Key growth components for Dollarama
Another key driver of Dollarama’s success has been its expansion strategy, which has focused on opening new stores across Canada. The company has a target of reaching 2,000 stores by 2031.
This aggressive expansion plan has been supported by the company’s strong cash flows and balance sheet, allowing it to invest in new stores while maintaining a stable dividend payout to shareholders.
All in all, Dollarama’s stock is an attractive investment option for investors looking for exposure to the discount retail sector. The company’s strong financial performance, growth prospects, and expansion plans make it a solid choice for investors with a long-term investment horizon.
That said, investors should also be aware of the risks associated with investing in a company that relies heavily on a single market and faces increasing competition from other players in the industry.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
