Your Briefing on Dollar General Stock

It hasn't been a great afternoon session for Dollar General investors, who have watched their shares sink by -2.1% to a price of $103.17. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.

A Very Low P/E Ratio but Trades Above Its Graham Number:

Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Dollar General has a trailing 12 month P/E ratio of 10.6 and a P/B ratio of 3.6.

When we divide Dollar General's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -29.0. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

Wider Gross Margins Than the Industry Average of 23.25%:

2017-03-24 2018-03-23 2019-03-22 2020-03-19 2021-03-19 2022-03-18
Revenue (MM) $21,987 $23,471 $25,625 $27,754 $33,747 $34,220
Gross Margins 31.0% 31.0% 30.0% 31.0% 32.0% 32.0%
Operating Margins 9% 9% 8% 8% 11% 9%
Net Margins 6.0% 7.0% 6.0% 6.0% 8.0% 7.0%
Net Income (MM) $1,251 $1,539 $1,589 $1,713 $2,655 $2,399
Net Interest Expense (MM) -$98 -$97 -$100 -$101 -$150 -$158
Depreciation & Amort. (MM) -$380 -$404 -$454 -$505 -$574 -$641
Earnings Per Share $4.43 $5.63 $5.97 $6.64 $10.62 $10.45
EPS Growth n/a 27.09% 6.04% 11.22% 59.94% -1.6%
Diluted Shares (MM) 282 273 266 258 250 230
Free Cash Flow (MM) $2,156 $2,447 $2,875 $3,020 $4,901 $3,931
Capital Expenditures (MM) -$551 -$645 -$732 -$782 -$1,025 -$1,066
Net Current Assets (MM) -$2,588 -$2,143 -$2,124 -$10,945 -$12,287 -$13,762
Long Term Debt (MM) $2,711 $2,605 $2,863 $2,912 $4,131 $4,172

Dollar General has strong margins with a stable trend and healthy debt levels. Additionally, the company's financial statements display wider gross margins than its peer group and a strong EPS growth trend. Furthermore, Dollar General has weak revenue growth and a flat capital expenditure trend and irregular cash flows.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.