October 17, 2024
Top 10 Stock Dollarama Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Dollarama – Top 10 Stock in Toronto Stock Exchange Index TSX Composite
Dollarama is listed as a top 10 stock on October 17, 2024 in the market index TSX Composite because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is growing above average and professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 65 (high 65% performer), Obermatt assesses an overall buy recommendation for Dollarama on October 17, 2024.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | General Merchandise Stores |
| Index | TSX Composite |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Dollarama Buy
| 360 METRICS | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 5 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 99 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 17 |
|
||||||
| SENTIMENT | ||||||||
| SENTIMENT | 91 |
|
||||||
| 360° VIEW | ||||||||
| 360° VIEW | 65 |
|
||||||
ANALYSIS: With an Obermatt 360° View of 65 (better than 65% compared with alternatives), overall professional sentiment and financial characteristics for the stock Dollarama are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Dollarama. The consolidated Growth Rank has a good rank of 99, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 99% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 91, which means that professional investors are more optimistic about the stock than for 91% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 5, which means that the share price of Dollarama is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 95% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 17, which means that the company has a financing structure that is riskier than those of 83% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 65, Dollarama is better positioned than 65% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 99), and professional market sentiment is positive (Sentiment Rank of 91), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Dollarama very positive
ANALYSIS: With an Obermatt Sentiment Rank of 91 (better than 91% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Dollarama is very positive. The Sentiment Rank is based on consolidating four sentiment indicators where all but one are above average for Dollarama. Analyst Opinions are at a rank of 70 (better than 70% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. The Professional Investors rank is also good at 73, which means that currently, professional investors hold more stock in this company than in 73% of alternative investment opportunities. Pros tend to favor investing in this company. In addition, Market Pulse has a rank of 98 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 98% of competitors). But Analyst Opinions Change has a below-average rank of 41, which means that stock research experts are currently changing their opinions for the worse when it comes to recommending this stock. In other words, they are getting more critical of investments in Dollarama. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 91 (more positive than 91% compared with investment alternatives), Dollarama has a reputation among professional investors that is significantly higher than that of its competitors. This is an early sign of caution, even if the stock has significantly appreciated. If analysts change their opinions, the stock may become too expensive. If the price is on the way down, the trend may continue. This may be a stock with a good reputation and history, but it may have reached its breaking point by now. Investors should look at the Value Ranks as well. If they indicate trouble, it might just materialize in the future. ...read more
Value Strategy: Dollarama Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 5 (worse than 95% compared with alternatives), Dollarama shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Dollarama. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 63% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales is 1 which means that the stock price compared with what market professionals expect for future profits is higher than 99% of comparable companies, indicating a low value concerning Dollarama's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 15 which means that the stock price compared with what market professionals expect for future profit levels is higher than 85% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 1 is also low. Compared with invested capital, the stock price is higher than for 99% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 5, is a sell recommendation based on Dollarama's stock price compared with the company's operational size and dividend yields. Should dividend investors pick Dollarama? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose Dollarama only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Dollarama Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 99 (better than 99% compared with alternatives) for 2024, Dollarama shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all four indicators above average for Dollarama. Sales Growth has a value of 65, which means that, currently, professionals expect the company to grow more than 65% of its competitors. The same is valid for Profit Growth with a value of 82 and for Capital Growth with 80. In addition, Stock Returns had an above-average rank value of 81, which means they have been higher than 81% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 99, is a buy recommendation for growth and momentum investors. Since all Growth Ranks are positive, Dollarama exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: Dollarama Debt Financing Safety risky
| SAFETY METRICS | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| LEVERAGE | ||||||||
| LEVERAGE | 11 |
|
||||||
| REFINANCING | ||||||||
| REFINANCING | 26 |
|
||||||
| LIQUIDITY | ||||||||
| LIQUIDITY | 65 |
|
||||||
| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 17 |
|
||||||
ANALYSIS: With an Obermatt Safety Rank of 17 (better than 17% compared with alternatives), the company Dollarama has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly above the industry average. This doesn't mean that the business of Dollarama is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Dollarama. Liquidity is at 65, meaning the company generates more profit to service its debt than 65% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 26, which means that the portion of the debt that is about to be refinanced is above average. It has more debt in the refinancing stage than 74% of its competitors. Leverage is also high at a rank of 11, which means that the company has an above-average debt-to-equity ratio. It has more debt than 89% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 17 (worse than 83% compared with alternatives), Dollarama has a financing structure that is significantly riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Dollarama Below-Average Financial Performance
| COMBINED PERFORMANCE | October 17, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 5 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 99 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 65 |
|
||||||
| COMBINED | ||||||||
| COMBINED | 29 |
|
||||||
ANALYSIS: With an Obermatt Combined Rank of 29 (worse than 71% compared with investment alternatives), Dollarama (General Merchandise Stores, Canada) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Dollarama are low in value (priced high) with a consolidated Value Rank of 5 (worse than 95% of alternatives), and are riskily financed (Safety Rank of 17, which means above-average debt burdens) but show above-average growth (Growth Rank of 99). ...read more
RECOMMENDATION: A Combined Rank of 29, is a hold recommendation based on Dollarama's financial characteristics. As the company Dollarama shows low value with an Obermatt Value Rank of 5 (95% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 99% of comparable companies (Obermatt Growth Rank is 99). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 17 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for Dollarama, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
Obermatt Portfolio Performance
We’re so convinced about our research, that we buy our stock tips.
See the performance of the Obermatt portfolio.