I do not own this stock of Dollarama Inc (TSX-DOL, OTC-DLMAF). I belong to an investment club and this was a stock I volunteered to look at. I had, of course, heard of this stock before and people have mentioned that it is doing very well for shareholders.
When I was updating my spreadsheet, I noticed they do not make things easy for analysis. They have a changing financial year data and kept changing the date of dividends within each year. They still have a shareholder deficit and yet they are still buying back shares. A shareholder deficit means that the breakup value of the company is negative.
There is lots of insider selling. The Net Insider Selling is 0.86% of market cap. This figure you expect to be around 0.01%. The CEO since last year has sold over 7M shares. The chairman has also sold some shares.
Dividend yields are in the low range (less than 2%). They are all below 1%, with the current yield at 0.38%, and the 5 and 7 year median yields at 0.44% and 0.46%. The dividend growth rate is moderate (under 15%) at 12% and 14.7% per year over the past 5 and 7 years. I generally do not buy stock with dividends under 1%. It takes too long to make a decent yield in dividends even a good (15% and above) rate of growth.
The Dividend Payout Ratios are good. The DPR for EPS for 2018 is 17% with 5 year coverage at 12.5%. The DPR for CFPS for 2018 is 13% with 5 year coverage at 10%.
Debt Ratios are awful. I am especially referring to the Debt Ratio. I would not buy a company with a negative book value. The Long Term Debt/Market Cap Ratio for 2018 a low at 0.17. The Liquidity Ratio for 2018 is 2.46. However, last year it was 0.76 and currently it is 1.18. So, this can fluctuate a lot. The Debt Ratio for 2018 is 0.90. This means that the assets cannot cover the liabilities. Leverage and Debt/Equity Ratios are not calculable because of the negative book value.
The Total Return per year is shown below for years of 5 to 10 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.13, 25.31, and 31.11. The corresponding 10 year ratios are 17.65, 22.23 and 26.77. The corresponding historical ratios are 17.65, 22.23 and 26.77. The current P/E Ratio is 25.56 based on a stock price of $46.00 and 2019 EPS estimate of $1.80. This stock price testing suggests that the stock price is relatively reasonable but above the median the median.
I get a Graham Price of $3.43. However, this is fudged because of the negative Book Value. It is really no calculable. The 10 year low, median, and high median Price/Graham Price Ratios are 2.15, 2.70 and 3.26. The current P/GP Ratio is 13.41 based on a stock price of $46.00. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 3.66. The current P/B Ratio is negative 136.54 based on a Book Value of negative $106M, Book Value per Share of negative $0.34 and a stock price of $46.00. The current ratio is some 3827% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 0.46%. The current dividend yield is 0.68% based on dividends of $0.18 and a stock price of $46.00. The current yield is 16.8% below the historical median yield. This stock price testing suggests that the stock price is relatively reasonable but above the median the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.67. The current P/S Ratio is 3.81 based on 2019 Revenue estimate of $3,804M, Revenue per Share of $12.09 and a stock price of $46.00. The current ratio is 42.6% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The only tests really worth anything are the P/S Ratio and Dividend yield. I find the P/E Ratios rather high for a consumer stock, but I must admit this is not a favourite test of mine. Both the P/GP Ratio and P/B Ratios are nonsense as the Book Value is negative.
Is it a good company at a reasonable price? There is lots I do not like about this company. This starts with the negative book value. This means that the breakup value of the company is less than zero. I do not like very low dividend yields. You might as well not have dividends when they are lower than 1%. They are borrowing money to buy back shares while giving out stock options. There is currently lots of insider selling. I also think that the stock price is too high.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3) and Hold (8). The consensus would be a Buy. The 12 month stock price consensus is $50.92. This implies a total return of $11.08% with 0.38% from dividends and 10.70% from capital gains.
See what analysts are saying on Stock Chase. They like the stock but feel the price is high. Daniel Da Costa on Motley Fool says if you value investing, getting passive income with compounding and growth stock investing, then look to this stock. A writer on Simply Wall Street says he is not concerned about insider selling. A writer on Simply Wall Street says this is a stock than has gone zoom. Ambrogio Visconti on Global Legal Chronicle talks about Dollarama buying 50.1% interest in Latin American value retailer Dollarcity. Ploutos Investing on Seeking Alpha talks about this stock.
Dollarama Inc is a Canada-based company principally engaged in operating discount retail stores. 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. Its web site is here Dollarama Inc.
The last stock I wrote about was about was Encana Corp (TSX-ECA, NYSE-ECA) ... learn more. The next stock I will write about will be Keyera Corp (TSX-KEY, OTC-KEYUF) ... learn more on November 8, 2019 around 5 pm. Tomorrow on my other blog I will write about Something to Buy November 2019.... learn more on November 7, 2019 around 5 pm.
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