Wednesday, Credit Suisse initiated coverage of Dollarama Inc. (DOL.TO) stock with an Outperform rating and a price target of C$23.
Analyst Lee said that when it comes to Canada's dollar store industry, he believes it is less developed than the US, which provides the following positive attributes: lower dollar store penetration; no food stamps to drive lower margin consumables mix; and, less competitive rivalry. This structural difference is significant for Dollarama and drives opportunities for domestic dominance and robust growth.
The analyst noted that Dollarama's store network has impressive economics: average store contribution of 21%; active sku management with a 25% annual refresh; high ROI model with low capital intensity. With a new multi-pricing point lever, the analyst sees enhanced gross margin management and look forward to longer-term upside from POS and credit card systems implementation.
The analyst expects free cash flow to accelerate from C$63 million in 2010 to C$112 million in 2012. Pro-form the IPO, the analyst sees Net Debt/LTM EBITDA of 3.0x moving down to 1.4x by 2012.
In the analyst's view, management has an opportunity to use free cash flow to go beyond repaying debt, current priority, and in several years, would be in a position to consider a dividend or an acquisition. The best acquisition candidate in the analyst's view is Dollar Giant.
Currently, DOL.TO is up C$0.32 or 1.66% and trading at C$19.57.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.