Street Calls of the Week
On Tuesday, Scotiabank (TSX:BNS) resumed coverage on Dollarama Inc . (TSX:DOL:CN) (OTC: DLMAF), issuing a Sector Outperform rating and setting a new price target of C$150.00. The firm's analysts expressed confidence in the discount retailer's broad product range and diverse customer base, which they believe provides a buffer against economic fluctuations in Canada.
Dollarama's potential for growth was highlighted, particularly through its expansion into Latin America with Dollarcity. The analysts underscored Dollarama's track record as a strong compounder in the sector and its ability to replicate its Canadian success story internationally.
While acknowledging the risks associated with the company's current valuations, where slight earnings growth underperformance could significantly impact the stock price, Scotiabank considers such an event to be of low probability. They base their optimism on Dollarama's consistent performance and anticipate continued, although moderated, growth.
The price target of C$150.00 set by Scotiabank is based on a price-to-earnings (P/E) multiple of approximately 33 times on forecasted fiscal 2026/ calendar 2025 earnings (~28 times for Canada and ~65 times for Dollarcity). This target suggests a price to earnings to growth (PEG) ratio of 2.8 times, compared to the historical average of 1.8 times.
Scotiabank's analysis indicates a strong outlook for Dollarama, as the company continues to execute its growth strategy both domestically and in Latin America. The new price target reflects the firm's expectation of Dollarama's performance and market position in the coming year.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.