Dollarama (DOL:TSE) Fundamental Valuation Report

Posted on Posted in Fundamental Valuation Report
Dollarama (DOL:TSE) Fundamental Valuation Report

Fundamental Valuation Report

Dollarama(DOL:TSE)

Consumer Defensive:Discount Stores

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

–Close Price/Date
$57.66 (CAD) 04/29/2021

Weighted Valuation
$57.06 (CAD)

Overall Rating
Fairly valued to slightly Overvalued by 1.0%
Valuation Models Adjusted Book Value: $45.26 (CAD)
Multiples: $65.23 (CAD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $62.20 this stock is Undervalued

Company Overview (DOL:TSE CAD)

Price 57.66
Range 57.39 – 57.90
52 week 41.97 – 58.25
Open 57.42
Vol / Avg. 388216/774864
Mkt cap 17.89B
P/E 31.86
Div/yield 0.18/0.00
EPS 1.81
Shares 310.27M
Beta 0.90

Company Description

Dollarama Inc is a Canada-based company principally engaged in operating discount retail stores. The company provides a broad range of everyday consumer products, general merchandise, and seasonal items, with merchandise at low fixed price points. General merchandise and consumer products jointly account for the majority of the company’s product offerings. The company’s stores are throughout Canada, generally located in convenient locations, such as metropolitan areas, midsize cities, and small towns. All the stores are owned and operated by the company.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for DOL:TSE

Using a discounted cash flow model we generated an intrinsic value of $41.47 (CAD) for DOL:TSE

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

DOL:TSE Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $41.47 1% 5% 1% 5%
WACC (or Ke) 6.22 $52.67 $34.00
Terminal Growth Rate 1.20 $34.68 $51.64
Tax Rate 0.26 $44.80 $38.14
Cash Flow 1,164,749,531 $38.78 $44.16
Capital Expenditures -136,913,200 $41.18 $41.76
Long Term Debt 1,197,834,000 $41.66 $41.28

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $28.50 (CAD) for DOL:TSE. We also generated a valuation of $26.48 (CAD) using other metrics and comparables.
The comparable companies were Molson Coors Canada (TPX.B:TSE), Premium Brands Holdings (PBH:TSE), George Weston (WN:TSE), Loblaw Cos (L:TSE) and Empire Co (EMP.A:TSE).

Company DOL:TSE End Date Value
Earnings/Share $1.81 (CAD)
Book Value/Share $1.08 (CAD)
Sales/Share $12.89 (CAD)
Cash Flow/Share $2.85 (CAD)
EBITDA/Share $3.61 (CAD)
Price Based on Comps Adjustment Factor (%)
$50.21 (CAD) -18.2
$2.42 (CAD) 0.0
$9.06 (CAD) 0.0
$11.71 (CAD) 36.7
$56.05 (CAD) 30.7
DOL:TSE Ratios Used Average Values TPX.B:TSE PBH:TSE WN:TSE L:TSE EMP.A:TSE
31.86 PE Ratio 27.74 0.00 55.61 18.26 22.27 14.82
53.43 PB Ratio 2.25 0.96 3.25 2.37 2.20 2.44
4.47 PS Ratio 0.70 1.23 1.15 0.31 0.46 0.37
20.26 PCF Ratio 8.01 7.01 20.51 3.03 4.70 4.79
18.54 EV to EBITDA 15.53 35.08 21.11 6.21 7.57 7.66

Multiples

Using a multiples approach we generated a valuation of  $65.23 (CAD) for DOL:TSE

Company DOL:TSE End Date Value
Earnings/Share $1.81 (CAD)
Book Value/Share $1.08 (CAD)
Sales/Share $12.89 (CAD)
Cash Flow/Share $2.85 (CAD)
EBITDA/Share $3.61 (CAD)
Price Based on Comps Adjustment Factor
$53.00 (CAD) 0
$78.12 (CAD) 0
$55.02 (CAD) 0
$69.93 (CAD) 0
$70.10 (CAD) 0
Ratios Ratio Average
PE Ratio 29.28
PB Ratio 72.39
PS Ratio 4.27
PCF Ratio 24.58
EV to EBITDA 19.42

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  DOL:TSE for the last 10 years was  41.94

We ran the Adjusted Book Value for  DOL:TSE and generated a book value of  $1.08 (CAD)
By multiplying these we get an adjusted valuation of  $45.26 (CAD)

Analyst Data

In the Stockcalc database there are 10 analysts that provide a valuation for DOL:TSE. The 10 analysts have a concensus valuation for DOL:TSE for 2021 of $62.20 (CAD).

DOL:TSE Dollarama

Analyst Recommendation
Buy Hold Sell Rating
(of 5)		 Guidance As Of
4 4 0 4.0000 Outperform 2021-4-28

Current Price: 57.66 CAD

Analyst Consensus
CAD Millions 2022
Mean EPS 2.67
# EPS Analysts 8
Mean Revenue 4,776.10
# Revenue Analysts 9
Mean Target Price
Mean Cash Flow 3.54
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


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