Intrinsic value of Dollarama Inc. - DOL

Previous Close

$49.40

  Intrinsic Value

$55.24

stock screener

  Rating & Target

hold

+12%

Previous close

$49.40

 
Intrinsic value

$55.24

 
Up/down potential

+12%

 
Rating

hold

We calculate the intrinsic value of DOL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  3,250
  3,550
  3,863
  4,189
  4,527
  4,879
  5,245
  5,625
  6,020
  6,431
  6,858
  7,302
  7,764
  8,245
  8,746
  9,268
  9,812
  10,379
  10,971
  11,590
  12,235
  12,910
  13,615
  14,353
  15,124
  15,932
  16,777
  17,661
  18,588
  19,558
Variable operating expenses, $m
  2,245
  2,446
  2,655
  2,873
  3,099
  3,334
  3,579
  3,833
  4,097
  4,371
  4,584
  4,881
  5,190
  5,511
  5,846
  6,195
  6,558
  6,938
  7,334
  7,747
  8,179
  8,630
  9,101
  9,594
  10,110
  10,649
  11,214
  11,805
  12,425
  13,073
Fixed operating expenses, $m
  277
  283
  289
  296
  302
  309
  316
  323
  330
  337
  344
  352
  360
  368
  376
  384
  392
  401
  410
  419
  428
  437
  447
  457
  467
  477
  488
  498
  509
  521
Total operating expenses, $m
  2,522
  2,729
  2,944
  3,169
  3,401
  3,643
  3,895
  4,156
  4,427
  4,708
  4,928
  5,233
  5,550
  5,879
  6,222
  6,579
  6,950
  7,339
  7,744
  8,166
  8,607
  9,067
  9,548
  10,051
  10,577
  11,126
  11,702
  12,303
  12,934
  13,594
Operating income, $m
  728
  821
  919
  1,020
  1,126
  1,236
  1,351
  1,470
  1,594
  1,723
  1,930
  2,069
  2,215
  2,366
  2,524
  2,689
  2,861
  3,041
  3,228
  3,424
  3,629
  3,843
  4,067
  4,302
  4,548
  4,805
  5,075
  5,357
  5,654
  5,964
EBITDA, $m
  827
  923
  1,023
  1,127
  1,236
  1,349
  1,466
  1,589
  1,716
  1,848
  1,986
  2,129
  2,278
  2,434
  2,596
  2,765
  2,941
  3,126
  3,318
  3,519
  3,729
  3,949
  4,179
  4,420
  4,672
  4,936
  5,212
  5,502
  5,806
  6,125
Interest expense (income), $m
  28
  44
  47
  53
  59
  65
  72
  78
  85
  93
  100
  108
  116
  125
  133
  143
  152
  162
  173
  184
  195
  207
  219
  232
  246
  260
  274
  290
  306
  323
  341
Earnings before tax, $m
  684
  774
  866
  962
  1,061
  1,165
  1,272
  1,385
  1,501
  1,623
  1,822
  1,953
  2,090
  2,233
  2,382
  2,537
  2,699
  2,868
  3,044
  3,229
  3,422
  3,624
  3,835
  4,057
  4,288
  4,531
  4,785
  5,051
  5,331
  5,624
Tax expense, $m
  185
  209
  234
  260
  287
  314
  344
  374
  405
  438
  492
  527
  564
  603
  643
  685
  729
  774
  822
  872
  924
  979
  1,036
  1,095
  1,158
  1,223
  1,292
  1,364
  1,439
  1,518
Net income, $m
  499
  565
  632
  702
  775
  850
  929
  1,011
  1,096
  1,184
  1,330
  1,426
  1,526
  1,630
  1,739
  1,852
  1,970
  2,094
  2,222
  2,357
  2,498
  2,646
  2,800
  2,961
  3,130
  3,307
  3,493
  3,688
  3,891
  4,105

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,976
  2,158
  2,348
  2,546
  2,752
  2,966
  3,188
  3,420
  3,660
  3,909
  4,169
  4,439
  4,720
  5,012
  5,317
  5,634
  5,965
  6,310
  6,670
  7,045
  7,438
  7,848
  8,277
  8,725
  9,194
  9,685
  10,198
  10,736
  11,300
  11,889
Adjusted assets (=assets-cash), $m
  1,976
  2,158
  2,348
  2,546
  2,752
  2,966
  3,188
  3,420
  3,660
  3,909
  4,169
  4,439
  4,720
  5,012
  5,317
  5,634
  5,965
  6,310
  6,670
  7,045
  7,438
  7,848
  8,277
  8,725
  9,194
  9,685
  10,198
  10,736
  11,300
  11,889
Revenue / Adjusted assets
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
  1.645
Average production assets, $m
  575
  628
  684
  741
  801
  864
  928
  996
  1,066
  1,138
  1,214
  1,292
  1,374
  1,459
  1,548
  1,640
  1,737
  1,837
  1,942
  2,051
  2,166
  2,285
  2,410
  2,540
  2,677
  2,820
  2,969
  3,126
  3,290
  3,462
Working capital, $m
  289
  316
  344
  373
  403
  434
  467
  501
  536
  572
  610
  650
  691
  734
  778
  825
  873
  924
  976
  1,031
  1,089
  1,149
  1,212
  1,277
  1,346
  1,418
  1,493
  1,572
  1,654
  1,741
Total debt, $m
  1,344
  1,508
  1,680
  1,858
  2,043
  2,235
  2,436
  2,644
  2,860
  3,084
  3,318
  3,561
  3,814
  4,077
  4,351
  4,636
  4,934
  5,245
  5,569
  5,907
  6,260
  6,629
  7,015
  7,419
  7,841
  8,282
  8,745
  9,229
  9,736
  10,267
Total liabilities, $m
  1,778
  1,942
  2,114
  2,292
  2,477
  2,669
  2,870
  3,078
  3,294
  3,518
  3,752
  3,995
  4,248
  4,511
  4,785
  5,070
  5,368
  5,679
  6,003
  6,341
  6,694
  7,063
  7,449
  7,853
  8,275
  8,716
  9,179
  9,663
  10,170
  10,701
Total equity, $m
  198
  216
  235
  255
  275
  297
  319
  342
  366
  391
  417
  444
  472
  501
  532
  563
  596
  631
  667
  705
  744
  785
  828
  873
  919
  968
  1,020
  1,074
  1,130
  1,189
Total liabilities and equity, $m
  1,976
  2,158
  2,349
  2,547
  2,752
  2,966
  3,189
  3,420
  3,660
  3,909
  4,169
  4,439
  4,720
  5,012
  5,317
  5,633
  5,964
  6,310
  6,670
  7,046
  7,438
  7,848
  8,277
  8,726
  9,194
  9,684
  10,199
  10,737
  11,300
  11,890
Debt-to-equity ratio
  6.800
  6.990
  7.150
  7.300
  7.420
  7.540
  7.640
  7.730
  7.810
  7.890
  7.960
  8.020
  8.080
  8.130
  8.180
  8.230
  8.270
  8.310
  8.350
  8.380
  8.420
  8.450
  8.480
  8.500
  8.530
  8.550
  8.570
  8.600
  8.620
  8.630
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  499
  565
  632
  702
  775
  850
  929
  1,011
  1,096
  1,184
  1,330
  1,426
  1,526
  1,630
  1,739
  1,852
  1,970
  2,094
  2,222
  2,357
  2,498
  2,646
  2,800
  2,961
  3,130
  3,307
  3,493
  3,688
  3,891
  4,105
Depreciation, amort., depletion, $m
  99
  102
  104
  107
  110
  113
  116
  119
  122
  125
  56
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
  106
  112
  118
  124
  131
  137
  145
  152
  160
Funds from operations, $m
  598
  667
  737
  809
  885
  963
  1,045
  1,130
  1,218
  1,310
  1,386
  1,486
  1,589
  1,697
  1,810
  1,928
  2,050
  2,179
  2,312
  2,452
  2,598
  2,751
  2,911
  3,079
  3,254
  3,438
  3,631
  3,832
  4,044
  4,265
Change in working capital, $m
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  51
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
Cash from operations, $m
  573
  640
  709
  780
  854
  932
  1,012
  1,096
  1,183
  1,273
  1,348
  1,446
  1,548
  1,655
  1,766
  1,881
  2,002
  2,128
  2,260
  2,397
  2,541
  2,691
  2,849
  3,013
  3,186
  3,366
  3,555
  3,754
  3,961
  4,179
Maintenance CAPEX, $m
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -124
  -131
  -137
  -145
  -152
New CAPEX, $m
  -52
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -131
  -137
  -143
  -150
  -157
  -164
  -172
Cash from investing activities, $m
  -76
  -80
  -84
  -90
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -149
  -157
  -164
  -172
  -180
  -190
  -199
  -209
  -219
  -231
  -243
  -255
  -267
  -281
  -294
  -309
  -324
Free cash flow, $m
  496
  561
  624
  691
  760
  832
  907
  986
  1,067
  1,151
  1,220
  1,311
  1,407
  1,506
  1,609
  1,717
  1,830
  1,947
  2,070
  2,198
  2,332
  2,472
  2,618
  2,771
  2,931
  3,099
  3,275
  3,459
  3,653
  3,855
Issuance/(repayment) of debt, $m
  77
  164
  171
  178
  185
  193
  200
  208
  216
  225
  234
  243
  253
  263
  274
  286
  298
  310
  324
  338
  353
  369
  386
  403
  422
  442
  462
  484
  507
  531
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  77
  164
  171
  178
  185
  193
  200
  208
  216
  225
  234
  243
  253
  263
  274
  286
  298
  310
  324
  338
  353
  369
  386
  403
  422
  442
  462
  484
  507
  531
Total cash flow (excl. dividends), $m
  574
  725
  795
  869
  945
  1,025
  1,108
  1,194
  1,283
  1,376
  1,453
  1,554
  1,659
  1,769
  1,883
  2,003
  2,127
  2,258
  2,394
  2,536
  2,685
  2,841
  3,004
  3,175
  3,354
  3,541
  3,738
  3,943
  4,159
  4,386
Retained Cash Flow (-), $m
  -98
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  476
  707
  776
  849
  925
  1,003
  1,085
  1,170
  1,259
  1,351
  1,427
  1,527
  1,631
  1,740
  1,853
  1,971
  2,094
  2,223
  2,358
  2,499
  2,646
  2,800
  2,961
  3,130
  3,307
  3,492
  3,686
  3,890
  4,103
  4,327
Discount rate, %
  9.70
  10.19
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.38
  29.79
  31.28
  32.85
  34.49
  36.21
  38.03
  39.93
PV of cash for distribution, $m
  434
  582
  572
  555
  530
  498
  461
  421
  377
  333
  284
  242
  202
  166
  133
  104
  80
  60
  44
  31
  22
  15
  9
  6
  4
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Dollarama Inc. is a Canada-based holding company. The Company operates dollar stores. It has approximately 1,030 stores in operation in Canada. Its stores have an average area of approximately 9,942 square feet, and offer a range of consumer products, general merchandise and seasonal items, including private label and nationally branded products. Its merchandise is sold in individual or multiple units. The Company's stores are located in metropolitan areas, mid-sized cities and towns. Its general merchandise includes party supplies, office supplies, arts and craft supplies, greeting cards and stationery, giftware, household wares, kitchenware, glassware, hardware and electronics, toys and apparel. Its consumable products include household consumables, such as paper, plastics, foils and cleaning supplies, basic health and beauty care products, pet food, confectionery, drinks, snacks and other food products. Its seasonal products include Halloween and the winter holidays merchandise.

FINANCIAL RATIOS  of  Dollarama Inc. (DOL)

Valuation Ratios
P/E Ratio 12.7
Price to Sales 1.9
Price to Book 56.8
Price to Tangible Book
Price to Cash Flow 11.3
Price to Free Cash Flow 16.8
Growth Rates
Sales Growth Rate 11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 76.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 1050%
Total Debt to Equity 1329%
Interest Coverage 23
Management Effectiveness
Return On Assets 25.4%
Ret/ On Assets - 3 Yr. Avg. 22.3%
Return On Total Capital 31.6%
Ret/ On T. Cap. - 3 Yr. Avg. 27.7%
Return On Equity 157.3%
Return On Equity - 3 Yr. Avg. 86%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 39.2%
Gross Margin - 3 Yr. Avg. 38.4%
EBITDA Margin 23.6%
EBITDA Margin - 3 Yr. Avg. 21.8%
Operating Margin 21.8%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 20.7%
Pre-Tax Margin - 3 Yr. Avg. 19.3%
Net Profit Margin 15.1%
Net Profit Margin - 3 Yr. Avg. 14.1%
Effective Tax Rate 27.1%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 10.5%

DOL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DOL stock intrinsic value calculation we used $2963 million for the last fiscal year's total revenue generated by Dollarama Inc.. The default revenue input number comes from 2017 income statement of Dollarama Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DOL stock valuation model: a) initial revenue growth rate of 9.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.7%, whose default value for DOL is calculated based on our internal credit rating of Dollarama Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Dollarama Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DOL stock the variable cost ratio is equal to 69.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $271 million in the base year in the intrinsic value calculation for DOL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Dollarama Inc..

Corporate tax rate of 27% is the nominal tax rate for Dollarama Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DOL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DOL are equal to 17.7%.

Life of production assets of 21.6 years is the average useful life of capital assets used in Dollarama Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DOL is equal to 8.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $100 million for Dollarama Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 111.684 million for Dollarama Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Dollarama Inc. at the current share price and the inputted number of shares is $5.5 billion.

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