Does Dollarama Inc’s (TSE:DOL) 16.62% Earnings Growth Reflect The Long-Term Trend?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Dollarama Inc (TSX:DOL) useful as an attempt to give more color around how Dollarama is currently performing. View our latest analysis for Dollarama
Were DOL’s earnings stronger than its past performances and the industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique allows me to analyze different stocks on a similar basis, using new information. For Dollarama, its most recent bottom-line (trailing twelve month) is CA$519.41M, which, against last year’s figure, has jumped up by 16.62%. Given that these values are somewhat myopic, I have determined an annualized five-year value for DOL’s earnings, which stands at CA$309.82M This means generally, Dollarama has been able to increasingly raise its profits over the last few years as well.
What’s the driver of this growth? Well, let’s take a look at whether it is merely owing to an industry uplift, or if Dollarama has experienced some company-specific growth. In the last few years, Dollarama increased its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Viewing growth from a sector-level, the Canadian multiline retail industry has been growing its average earnings by double-digit 17.33% in the past twelve months, and a more subdued 7.31% over the last five years. This suggests that whatever uplift the industry is deriving benefit from, Dollarama has not been able to realize the gains unlike its average peer.
What does this mean?
Though Dollarama’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Dollarama to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for DOL’s future growth? Take a look at our free research report of analyst consensus for DOL’s outlook.
Financial Health: Is DOL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 28 January 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
