If you look at the past five years alone, you’ll see that investors have made huge returns.
Over the past five years, the stock has grown approximately 290%, at a compound annual growth rate (CAGR) of more than 30%. Going back further, at the time of writing, the stock has seen massive growth of over 700% over the past decade. If you look at the share prices when the company went public, the stock has returned over 6,000%.
The rapid growth it has delivered could be reason enough for many to invest in the stock. Plus, the consistency and strength of compounding really make it an investment you can’t ignore.
If you’re thinking about adding Dollarama stock to your portfolio, here are a few things to consider.
A robust and reliable business model
The first thing you notice about Dollarama is its ingenious business model. The $54.79 billion market cap company owns Canada’s largest chain of discount stores. The company offers a wide range of everyday consumer products, general merchandise and much more at much better prices than regular stores.
This attracts people who are looking for cost savings by offering them a better alternative. Even when the economy is doing well, business is booming for Dollarama thanks to price-conscious consumers. This business model adds defensive behavior, allowing Dollarama to generate significant revenue regardless of economic cycles.
A record for consistency
Typically, defensive companies tend to be boring stocks because management tends to play it safe when it comes to the way they run the business. With Dollarama, the company is taking advantage of its defensive business model and using it to drive growth. Management has grown the company quickly and sustainably through acquisitions over the years.
The company has shown that it can consistently grow its profits, expand through acquisitions and pay dividends. These features can make it an excellent investment to consider.
Plenty of growth potential
Dollarama has become huge since it went public, but that doesn’t mean its growth is over. The company quickly expanded its presence across Canada, but has since moved into other international markets as well.
It continues to open new locations domestically. Internationally, it has an interest in Latin America through Dollarcity. The company has also recently entered the Australian market, giving it more room for growth in a new international market.
Silly takeaway
With all the growth it has delivered and the future growth potential yet to be realized, Dollarama stock seems too good to pass up. Even though it may not deliver the same kind of returns as the early investors, you can still get huge returns from the stock in the long run.
I would advise allocating some of the contribution space in your room Tax-free savings account (TFSA) in its shares for compounded and tax-free long-term capital growth.
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