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Is It Too Late To Consider Buying Dollarama Inc. (TSE:DOL)?

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Let's talk about the popular Dollarama Inc. (TSE:DOL). The company's shares received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$60.70 at one point, and dropping to the lows of CA$53.96. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Dollarama's current trading price of CA$55.98 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dollarama’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Dollarama

What's the opportunity in Dollarama?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.47% above my intrinsic value, which means if you buy Dollarama today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$55.17, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Dollarama has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Dollarama?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Dollarama's earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in DOL’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on DOL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Dollarama as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Dollarama you should know about.

If you are no longer interested in Dollarama, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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