The shop selling cheap birthday bags has done an excellent job of making its shareholders feel less cheap. Clearly, a business doesn’t need glamorous products to produce a remarkable investment return. It needs customers who keep coming back and earnings that keep finding room to grow.
That makes a decade of owning a discount retailer an interesting lesson. The result came from thousands of everyday purchases, new stores, and expanding profits, not just one product suddenly changing the world.
The important question now is whether that history helps identify a durable business, or merely encourages investors to pay any price for it.
Start with the right shares
Dollarama (TSX: DOL) makes the comparison concrete. Its October 2016 month-end share price was $100.23 before the three-for-one split completed in 2018.
A $10,000 budget could have bought 99 shares for $9,922.77, leaving $77.23. After the split, the holding became 297 shares. To be clear, the split itself created no wealth, since each original share was simply divided into three.
At a recent share price of $194.84, those shares were worth $57,867.48! Add the original uninvested cash and the account held $57,944.71 before dividends, taxes and trading costs.
The dates span just under 10 years. The split-adjusted share price grew at roughly 19% annually, with dividends providing additional cash outside this calculation.
Boring purchases add up
So, how did the company get here? Dollarama sells low-priced household goods, food, seasonal items and general merchandise. Its sourcing scale and store network help it offer convenient value while earning a profit. That model gives it a useful customer proposition when budgets are tight. A shopper doesn’t need a booming economy to decide the party decorations cost too much elsewhere.
The latest results still show customers responding. Canadian comparable-store sales, which track growth at established locations, rose 5.4% in the second quarter of fiscal 2027. Diluted earnings also increased 11.2% to $1.29 a share.
New Canadian stores and international investments add further growth opportunities. The Australian business is undergoing a transformation, while Latin American expansion provides another route beyond Canada’s eventual store limits. The opportunity therefore reaches beyond customers putting one more item in the basket. Execution abroad can expand the business shareholders own.
Yesterday’s return has a price today
Recent valuation data put Dollarama at roughly 40 times trailing earnings, showing how much investors are willing to pay for its growth record. That’s a demanding price. The shops may specialize in bargains, but shares haven’t taken the same pledge.
For investors buying stocks in Canada, the lesson is to connect the return to earnings and valuation. Future results depend on both what the company earns and what investors pay for those earnings.
A fresh $10,000 growing at 10% annually would reach about $25,937 after ten years. Swapping the 10% with a 19% growth rate would produce about $56,947. That wide gap shows how much the chosen growth assumption changes the outcome.
Keep expectations sensible
The risks are paying too much and assuming international stores will copy Canada’s economics. Australia’s lower profitability can absorb investment before contributing meaningful earnings.
I’d be comfortable holding Dollarama for years, while spreading new purchases over time at this valuation. The business deserves respect. The historical return doesn’t eliminate the purchase price. Eligible gains inside a Tax-Free Savings Account (TFSA) can compound tax-free, with contributions limited by your available room.
Bottom line
Dollarama turned ordinary shopping into an extraordinary shareholder result. Its next decade can still reward patient owners, especially those who leave room for business growth to do the work instead of paying for all of it in advance.