Stock of the Month April 2014: Dollarama Inc. (DOL)

As I was walking home from work a few weeks ago, I was stopped and asked if knew where the closest Dollarama is.

Seeing how my interest in stocks had just started to grow, the first thing I did when I got home was to check the stock price of this company.

Upon doing further research on Dollarama, I have came across many positive feedbacks relating to this particular stock. After that, it didn’t take me long to get a piece of the action. Here is my reason why.

Discounted Purchase

The first thing that I noticed in regards to this stock was the discounted price. In the last quarter, Dollarama has reported a slight drop in its stocks.

The reason for this drop was reported to be the cold weather. The long winter in Canada gave the shoppers very little incentive to leave their homes. However, now that the weather is starting to warm up again for the spring, it has been predicted that the stock will begin to resume its growth.

Competition

Another major reason why I have purchased Dollarama stocks was because it appears to be the only memorable “dollar store” in Canada. I am a frequent shopper at many of these so called dollar stores and to be honest, I have not remembered most of the store names.

To me, Dollarama appears to be the monopoly of this dollar store industry. It doesn’t have much competition and it is the only big name dollar store around the Greater Toronto Area.

Growth Potential

I believe that there is still a lot of room for growth within this company and it has yet to reach its maximum potential. Dollarama is performing in the direction of a steady upward trend since 2009. The stock grew from $20 per share to $80 per share within a 5 year period!

Recently, the company has started to introduce a different pricing system. This system allows them to price items for more than $1. With a strong reputation, this new pricing method will most likely increase revenue instead of repelling their loyal customers.

How well the company will perform in times of a recession is up for speculation. My opinion is that people will always be shopping no matter how well or poor the economy is. If this is really the case, Dollarama should see an increase in revenues during this time because people will be looking for lower prices.

Final Thought

In summary, this company attracts the low income shoppers which hold the largest population in most metropolitan cities. I believe this is part of the reason why the company is performing so well and why there are so many new stores opening up.

 

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