Can you please advise on Dollarama?
Thanks for the assignment. This will be my second run at the case for Dollarama Inc. (DOL TSX). The last analysis was conducted on March 19, 2014 when the shares were trading for $88.20. Frank had been a buyer in 2010 and wanted my thoughts on the future of the company.
The research indicated that the shares had enjoyed a sweet advance testing support along the 50 and 200-day moving averages but not breaching them. It was observed that the shares had been pulling back from a 52-week high of $90.74 but had once again found support along the 200-day moving average. In addition the shares were meeting resistance near $88.00.
It was advised that breaking through $88.00 with conviction would require some effort and that Q4 and FY results would be announced in April of 2014. It was mentioned that DOL would have to manage increased competition in the discount retail space.
The stock bounced around until September of 2014 when the MACD and the RSI generated buy signals head of the announcement of a two for one stock split. Since then the stock ran to a 52-week high of $94.87 in early June of 2016.
Another inspection of the details will provide additional metrics for your evaluation.
The three-year chart provides a textbook example of a long and profitable run that came to end in November of 2015. The stock broke below the 50-day moving average in December and then the 200-day moving average in January of 2016. DOL caught a bounce off support at $70.00 in February of this year as the MACD and the RSI generated buy signals.
At the moment the shares are building a base in the $90.00 range and are trying to begin an new up leg.
The six-month chart provides a closeup of the buy signals generated by the MACD and the RSI in early March taking the shares from the the $76.00 range to near $92.00 by the end of the month. Make note of the base building in the $90.00 range and the support along the 50-day moving average that has been retested multiple times since late May.
There are no indications that we can expect a new leg up in the near future. Having said that,the management team at DOL has been able to fight off the competition and continuing to serve customers attracted by their discount model. I would say that you would be well served accumulating this stock
Next time I will inspect Naturally Splendid Enterprises Ltd.(NSP TSXV) for Jenn.
Make it a profitable day and happy capitalism!