Stock (Symbol) |
Dollar General (DG) |
Stock Price |
$95 |
Sector |
| Retail & Travel |
Data is as of |
| July 25, 2016 |
Expected to Report |
| Aug 25 – 29 |
Company Description |
 Dollar General Corporation offers a selection of merchandise, including consumables, seasonal, home products and apparel. Consumables category includes paper and cleaning products; packaged food; perishables; snacks; health and beauty; pet and tobacco products. Seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. Home products includes kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. Apparel includes casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories. Its merchandise includes national brands and private brands selections. It operates approximately 11,879 stores located in over 43 states. Source: Thomson Financial |
Sharek’s Take |
 For the 2nd straight qtr, Dollar General (DG) spiked to a new All-Time high after reporting earnings. But this last qtr was especially impressive as profit growth accelerated from 11% to 23%. Sales increased 7% and same store sales grew 2% for the 3rd straight qtr. Traffic count and average ticket rose for the 33rd straight qtr. Consumables continue to do well, and a basket with food in it is 50% higher than one without. Since 2008 Dollar General increased the cooler count 50% as its remodeled stores, and now its adding 23,000 coolers across 9000 stores. The company has Millennial shoppers who shop in DG 3x a month, are 12% of shoppers yet 24% of sales, and use “Dollar General digital coupon app to make lists, find deals, and save money.” — DG’s CEO. The company expanded from 11,800 stores to 12,500 last year. It plans to grow to 13,400 and remodel 875 this year. Management takes care of its shareholders, and paid out more than $300 million last qtr on dividends and stock buybacks. Management’s long-term goal is 11% to 17% total annual shareholder return through profit growth and dividend yield. Analysts estimate DG will grow 14% long-term, and with the 1% dividend that would be a a 15% estimated total annual return. The stock also sells for a reasonable 21x earnings. This is a core holding for both conservative investors and those who want more growth too. DG’s hot right now too as profit growth accelerated to the highest in years. |
One Year Chart |
 DG broke out for the 2nd straight qtr after it reported earnings. Analysts had expected 13% profit growth but the company smashed views with 23%. The beat was attributed to better profit margins, lower expenses and a lower tax rate. Still, forward looking estimates didn’t rise much. Perhaps that will allow DG to continue to beat the street. Here’s the recent history of earnings beats: 1 cent, met estimates, beat by 4 cents, and beat by 8 cents last qtr. Estimates for the next 4 qtrs are 15%, 14%, 18% and 10% (analysts may need time to adjust this 10% one). |
Fair Value |
 Dollar General was a public company before 2007, then went private and then DG had another IPO in 2009. Since then profits have grown each year at solid rates, and recently investors have grown to appreciate the stock more as the P/E has risen from 16 to 18 and now 21. I feel DG is worth 20x earnings, but maybe I should up that. There’s a good change this company continues to grow profits 20%, and that would mean a P/E of maybe 20-25. |
Bottom Line |
 Dollar General opens stores, remodels old ones, buys back stock and pays a dividend. That’s an excellent recipe for success. And now profit margins rose, and so did the profit growth rate. This stock is a solid buy-and-hold investment that’s also timely right now. DG ranks 20th in the Growth Portfolio Power Rankings and 6th in the Conservative Portfolio Power Rankings. It doesn’t have enough upside to its Fair Value for the Aggressive Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
20 of 33Aggressive Growth Portfolio N/AConservative Stock Portfolio 6 of 34 |
