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Many companies are preparing to cut profits in a global inflation crisis. Nevertheless, dollarama (TSX:DOL) and CCL Industries (TSX:CCL.B) might not have as many problems given its strong fundamentals. If you were to invest in the current environment, both Canadian stocks offer great value and growth.
Dollarama, an iconic value retailer in Canada, remains a strong investment prospect, despite growing pessimism about slowing economic growth. The business of this $22 billion company thrives on its wide variety of products available to people from all walks of life. It is also one of the undervalued stocks today.
As of the close of the second quarter (Q2) fiscal 2023 (three months ended July 31, 2022), Dollarama had 1,444 operating stores across the country and expansion of its network is ongoing. Such expansion is consistent with Dollarama’s strategy to increase sales, operating income, net income, earnings per share (EPS) and cash flows. It also has a 50.1% stake in Dollarcity, a value retailer in Latin America.
On March 30, 2022, the company introduced new price points up to $5. According to management, the implementation of this latest multi-price point strategy is gradually rolling out to stores throughout fiscal year 2023. In the first six months of fiscal year 2023, sales and operating income increased by 15.4% and 27.7% compared to the same period in fiscal year 2022. .
Net profit during the same period was $338.98 million, which represents a year-on-year growth of 30.48%. Because Dollarama generates sufficient cash flow from operating activities ($252.11 million in six months), the company is able to finance planned growth, pay down debt and make dividend payments to shareholders.
It is worth noting that monitoring and improving operations are constant concerns of Dollarama. Also, understanding and managing risks are important parts of management’s strategic planning process. If you invest today, consumer discretionary stocks are trading at $76.52 per share (+21.15% YTD). The dividend yield is a modest 0.28%, but it should be safe and durable.
Strong end market demand
CCL Industries is a good stock to buy in this challenging environment. At $65.11 per share (-2.85% YTD), the dividend yield is a decent 1.44%. The specialty packaging pioneer is headquartered in Toronto, Ontario, but operates production facilities (204 in total) in 43 countries.
This $11.52 billion provider of specialty label, security and packaging solutions serves government institutions and large global customers in the consumer packaging, healthcare and chemicals, consumer electronics and automotive markets. CCL converts specialty and pressure sensitive extruded film materials for a wide range of decorative, educational, functional and security applications.
In the first half of this year (six months ended June 30, 2022), operating income, net income and sales grew 3.9%, 4.3% and 13.8% compared to the same period in 2021. In addition to the Increasing net income of 6.8% to $163.4 million in the second quarter of 2022 compared to the second quarter of 2021, CCL reported organic sales growth year over year of 10.9%.
Geoffrey T. Martin, Chairman and CEO of CCL, said, “Looking ahead, end-market demand appears to remain strong and there are early signs that supply chain challenges may ease going forward.” Over the past decade, the total return on the stock over 10.01 years is 885.85%, a remarkable CAGR of 25.68%.
value and growth
Investors looking for value and growth stocks in one can choose between Dollarama or CCL Industries.