Image source: Getty Images.
Earnings can be a fantastic catalyst for growth, as they provide a clear picture of a company’s health and financial performance. When a company reports good results, investor confidence often increases, leading to increased demand for its shares. This can push up the share price, creating a positive feedback loop where higher share prices attract more investors.
Furthermore, strong earnings give companies the financial strength to reinvest in their operations, expand their offerings, and even explore new markets, which sets the stage for future growth. So, when earnings reports are released, they can really generate excitement and momentum, making them a key driver for growth in the market. With that in mind, let’s look at two of the upcoming ones.
dollarama
dollarama (TSX:DOL) Earnings could be a nice catalyst for higher returns, particularly as the company continues to show impressive growth across its operations. With a market capitalization of approximately $38.74 billion and a price-to-earnings (P/E) ratio of 36.89, Dollarama has positioned itself as a key player in the discount retail space. Right now, Dollarama is thriving thanks to the consistent demand for affordable staples.
In its most recent quarter, Dollarama reported an 8.6% increase in sales, driven by 5.6% growth in comparable-store sales. This strong performance, combined with a notable 22.2% increase in diluted net earnings per share, demonstrated the company’s ability to capitalize on customer demand, especially at a time when consumers are increasingly looking for value in their purchases.
The expansion of Dollarama’s international presence through its investment in Dollarcity is another promising sign of future growth. With plans to increase its store count to 1,050 in Latin America by 2031, the company is tapping into a lucrative market with significant untapped potential. This strategic move not only diversifies its revenue streams, but also positions Dollarama to benefit from the growing consumer base in these regions. Furthermore, with a strong earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 29.7% and effective cost management leading to lower logistics expenses, Dollarama is well-equipped to maintain its profitability while investing in expansion.
Additionally, Dollarama’s commitment to returning value to shareholders, as seen in its share buyback program and regular dividend payments, adds another layer of appeal. With a forward annual dividend yield of 0.27% and a modest payout ratio of 8.23%, the company demonstrates its ability to reward investors. All while investing in its growth. As the company continues to improve its earnings and expand its market presence, holding Dollarama stock could yield great returns, especially for investors looking to capitalize on a strong and growing brand in the retail sector.
Transcontinental
Transcontinental (TSX:TCL.A) has the potential to provide further returns, particularly as the company has demonstrated resilience and adaptability in a challenging market. With a market capitalization of approximately $1.45 billion and a price-to-earnings ratio of 15.84, Transcontinental offers an attractive valuation relative to its earnings. Recent earnings reports highlighted strong performance in the packaging sector, with adjusted operating earnings before depreciation and amortization increasing by 1.0%. This was driven by a strategic shift toward higher value-added products. Despite a decline in overall revenue, the company’s focus on cost reduction and improving its product mix bodes well for future profitability.
Furthermore, Transcontinental’s recent initiatives such as the implementation of Raddar in its retail services and printing sector are expected to drive growth and improve customer engagement. The positive customer response to this innovative product indicates that the company is not only addressing current market demands but is also positioning itself for long-term success. With a strong adjusted net earnings growth of 37.4% in the first half of fiscal year 2024, there is a clear trend towards improved operational efficiency that can translate into higher returns for investors in the near future.
Finally, the company's commitment to reducing its net debt while generating significant cash flows from operating activities creates a strong foundation for sustained growth. Transcontinental is strategically balancing its investments and returning capital to shareholders. The stock now offers a forward annual dividend yield of 5.36% that provides attractive passive income. As the company continues to execute on its financial and profitability improvement program, it could generate higher earnings. Consequently, there will be higher returns for investors who choose to hold or buy this promising stock.