If I Could Only Buy and Hold a Single Stock, This Would Be It

The announcement of a ceasefire between the United States and Iran, along with ongoing peace talks, initially lifted investor sentiment and eased energy prices, pushing Canadian equity markets higher. However, Donald Trump’s rejection of Iran’s response to the U.S. peace proposal has once again unsettled investors, raising concerns that the Middle East conflict could drag on and disrupt shipping through the Strait of Hormuz.

Despite the uncertainty, long-term investors should look beyond short-term market volatility and focus on fundamentally strong companies with resilient business models and healthy cash flows. Against this backdrop, I believe Dollarama (TSX:DOL) stands out as an attractive long-term investment. Let’s examine its business outlook, financial performance, and growth prospects to assess the buying opportunity in the stock.

Dollarama’s business outlook

Dollarama is a leading discount retailer with 1,691 stores across Canada and 402 locations in Australia. Its direct-sourcing model strengthens bargaining power while eliminating intermediary costs. Combined with an efficient logistics network, this strategy helps the company keep costs low and offer a broad range of consumer products at attractive prices. As a result, Dollarama continues to generate solid same-store sales growth regardless of the broader macroeconomic environment.

The retailer has also achieved impressive expansion over the years, growing its store network from 652 locations in fiscal 2011 to 2,093 locations today (including the Australian operation). This steady expansion has driven strong financial growth, with revenue and net income increasing at annualized rates of 11.5% and 17.5%, respectively, since 2011. Over the 0same period, its EBITDA (earnings before interest, taxes, depreciation, and amortization) margin expanded significantly from 16.5% to 33.2%, reflecting the strength and scalability of its business model. Supported by these solid fundamentals, the stock has generated a remarkable total return of nearly 3,560% over the last 15 years, representing an annualized return of 27.1%.

Let’s now examine the company’s future growth prospects.

Dollarama’s growth prospects

Dollarama continues to expand its store network to drive long-term growth. For the current fiscal year, management expects store openings to return to its normal range of 60–70 new locations, following an above-average 75-store opening in the previous fiscal year. The company also projects same-store sales growth of 3–4%, reflecting resilient consumer demand and the strength of its value-focused business model.

Meanwhile, management expects capital expenditures to rise to $420 million–$470 million this fiscal year from $252.6 million in fiscal 2026. Higher spending will primarily fund the development of a new logistics hub in Western Canada, which should improve the company’s supply chain efficiency and support future expansion initiatives.

Looking further ahead, Dollarama plans to increase its Canadian store count to 2,200 by the end of 2034 while expanding its Australian footprint to 700 locations. Given its capital-efficient operating model, rapid sales ramp-up, short payback period, and relatively low maintenance requirements, these expansion plans could significantly enhance long-term revenue and profitability.

In addition, Dollarama owns a 60.1% stake in Dollarcity, which operates 732 discount stores across five Latin American countries. Dollarcity also plans to expand its network to 1,050 stores by the end of fiscal 2031. Furthermore, Dollarama holds the option to increase its ownership stake to 70%, which could further boost its exposure to the fast-growing Latin American discount retail market. Supported by these domestic and international expansion opportunities, Dollarama appears well-positioned to deliver healthy, long-term financial growth.

Investors’ takeaway

Dollarama has faced pressure since reporting its fourth-quarter results in March. Softer-than-expected same-store sales growth, a decline in EBITDA margins due to the acquisition and integration of The Reject Shop, and weaker fiscal 2027 same-store sales guidance appear to have weighed on investor sentiment, pulling the stock lower.

However, I believe the recent pullback presents an attractive buying opportunity for long-term investors. Backed by a resilient business model, strong cash flows, and significant domestic and international growth opportunities, Dollarama remains well-positioned to deliver healthy long-term returns.

The post If I Could Only Buy and Hold a Single Stock, This Would Be It appeared first on The Motley Fool Canada.

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More reading

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• 3 Canadian Blue-Chip Stocks to Hold Through 2026 and Beyond
• 3 Canadian Stocks That Look Undervalued and Worth Buying Right Now

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Dollarama. The Motley Fool has a disclosure policy.