BMO (TSX:BMO) Capital Markets has maintained its Outperform rating on Dollarama Inc . (TSX:DOL: CN) (OTC: DLMAF), with a steady price target of C$147.00.
The firm's endorsement of the Canadian dollar store chain's stock is based on the company's growth prospects, particularly through its venture into the Mexican market with Dollarcity.
The analyst from BMO Capital highlighted the potential of Dollarcity in Mexico, projecting that its earnings will become significantly impactful by the year 2030.
As Dollarcity's presence in Mexico expands, its influence on Dollarama's overall performance is expected to grow, making the U.S. election and the subsequent trade policies key factors to watch.
Investors with a long-term view may find Dollarama's stock appealing, especially when considering a sum-of-the-parts (SOTP) valuation. Under this approach, assuming a 25 times price-to-earnings (P/E) ratio for Dollarama's Canadian operations, the current stock price suggests a 40 times multiple on the firm's projected earnings for Dollarcity two years ahead.
BMO's analysis indicates a conviction in Dollarama's medium-term growth potential, which remains the foundation of their recommendation.
The firm's unchanged thesis suggests confidence in the retailer's strategy and future earnings prospects, despite the longer time horizon for Dollarcity's contribution to materialize.
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