Earnings Miss: Dollarama Inc. Missed EPS By 7.3% And Analysts Are Revising Their Forecasts

·3 min read

The quarterly results for Dollarama Inc. (TSE:DOL) were released last week, making it a good time to revisit its performance. It looks like the results were a bit of a negative overall. While revenues of CA$954m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 7.3% to hit CA$0.37 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Dollarama after the latest results.

See our latest analysis for Dollarama

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After the latest results, the twelve analysts covering Dollarama are now predicting revenues of CA$4.42b in 2022. If met, this would reflect a credible 6.9% improvement in sales compared to the last 12 months. Per-share earnings are expected to climb 14% to CA$2.17. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$4.41b and earnings per share (EPS) of CA$2.21 in 2022. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The analysts reconfirmed their price target of CA$61.50, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Dollarama, with the most bullish analyst valuing it at CA$70.00 and the most bearish at CA$52.00 per share. This is a very narrow spread of estimates, implying either that Dollarama is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 9.2% growth on an annualised basis. That is in line with its 8.0% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 4.7% annually. So it's pretty clear that Dollarama is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at CA$61.50, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Dollarama. Long-term earnings power is much more important than next year's profits. We have forecasts for Dollarama going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for Dollarama you should know about.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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