Dollar Tree -- The Essentials

Now trading at a price of $106.54, Dollar Tree has moved -1.5% so far today.

Dollar Tree returned losses of -23.0% last year, with its stock price reaching a high of $170.36 and a low of $102.77. Over the same period, the stock underperformed the S&P 500 index by -46.0%. As of April 2023, the company's 50-day average price was $123.92. Dollar Tree, Inc. operates discount variety retail stores. Based in Chesapeake, VA, the large-cap Consumer Discretionary company has 65,025 full time employees. Dollar Tree has not offered a dividend during the last year.

Healthy Debt Levels but a Declining EPS Growth Trend:

2018-03-16 2019-03-27 2020-03-20 2021-03-16 2022-03-15 2023-03-10
Revenue (MM) $22,246 $22,823 $23,611 $25,509 $26,321 $28,332
Gross Margins 32.0% 30.0% 30.0% 31.0% 28.0% 32.0%
Operating Margins 9% 8% 7% 7% 7% 8%
Net Margins 8.0% -7.0% 4.0% 5.0% 5.0% 6.0%
Net Income (MM) $1,714 -$1,591 $827 $1,342 $1,328 $1,615
Net Interest Expense (MM) -$302 -$370 -$162 -$147 -$179 -$125
Depreciation & Amort. (MM) -$611 -$621 -$645 -$687 -$716 -$768
Earnings Per Share $7.21 -$6.66 $3.47 $5.65 $5.79 $7.04
EPS Growth n/a -192.37% 152.1% 62.82% 2.48% 21.59%
Diluted Shares (MM) 238 239 238 237 230 230
Free Cash Flow (MM) $2,142 $2,583 $2,890 $3,606 $2,451 $2,869
Capital Expenditures (MM) -$632 -$817 -$1,020 -$890 -$1,020 -$1,254
Net Current Assets (MM) -$4,574 -$3,565 -$9,050 -$8,360 -$8,394 -$7,904
Long Term Debt (MM) $4,862 $4,344 $3,522 $3,226 $3,417 $3,422

Dollar Tree has strong margins with a stable trend, healthy debt levels, and wider gross margins than its peer group. However, the firm has declining EPS growth. Finally, we note that Dollar Tree has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities.

Dollar Tree's Valuation Is in Line With Its Sector Averages:

Dollar Tree has a trailing twelve month P/E ratio of 21.8, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of $7.07, the company has a forward P/E ratio of 17.5. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is -3.9%. On this basis, the company's PEG ratio is -5.6, which indicates that its shares are overpriced. In contrast, the market is likely undervaluing Dollar Tree in terms of its equity because its P/B ratio is 2.59 while the sector average is 3.12. The company's shares are currently trading 37.1% above their Graham number.

There's an Analyst Consensus of Strong Upside Potential for Dollar Tree:

The 23 analysts following Dollar Tree have set target prices ranging from $105.0 to $195.0 per share, for an average of $150.7 with a buy rating. As of April 2023, the company is trading -17.8% away from its average target price, indicating that there is an analyst consensus of strong upside potential.

Dollar Tree has an average amount of shares sold short because 3.6% of the company's shares are sold short. Institutions own 103.2% of the company's shares, and the insider ownership rate stands at 0.26%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 11% stake in the company is worth $2,546,858,644.

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.