Parkev Tatevosian, CFA on $DG (Nov 3, 2026)
Dollar General is rated a buy with low conviction: the speaker's discounted cash flow assessment gives $165 per share versus a $126 market price, so it looks undervalued that way, though the 15 forward P/E seems a bit overvalued given its growth prospects. He doubts analysts' 11.4% EPS growth and bets on 7% to 9% over three to five years, as reaching management's 6% to 8% operating margin target requires a long improvement process he is unsure they can execute in this macro backdrop; things look good now, but his confidence is weak.
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The management team at Dollar General said something really interesting for all stock market investors, not just investors interested in this company.
Here’s what they said: Even families earning more than $100,000 a year follow consumer behaviors that mimic those of less wealthy, lower-income consumers.
But I found it interesting that the management team at Dollar General notes that people who earn more than $100,000 a year are forced to resort to these buying habits where they buy things piece by piece.
So, in general, when consumers search for these types of areas, it's good news for Dollar General, which typically thrives during tough economic times.
Is it a good time to buy Dollar General shares? This is the question I want to answer in this video. Interestingly, since 2025, you can see that Dollar General analysts who follow the company have become more optimistic about its prospects because the consumer budget since 2025 is getting worse, isn't it?
Therefore, analysts now expect Dollar General to achieve earnings per share of 11.4% over the next few years. In fact, the management team at Dollar General also presented optimistic forecasts indicating that their operating profit margin would rise to between 6% and 8% on average.
They have already shown an improvement in their operating profit margins, which have risen from 4% to 5.6%. They did this by reducing waste or theft in their stores, and by reducing the damage caused by employees and customers in their stores.
Remember that these are stores that have not received sufficient investment over many years. These are some of the most underinvested websites or retailers you will ever find. Therefore, any improvement in this category has a very significant impact.
Dollar General is currently trading at a forward price-to-earnings ratio of 15, which seems a bit overvalued to me given its growth and profitability prospects.
If Dollar General actually manages to achieve the level of earnings per share that analysts are predicting, I would consider that a major victory. In fact, I would bet the company will not achieve these earnings per share projections over the next three to five years.
I would say they will achieve a percentage closer to 7% to 9% rather than 11% or more.
Because the company is not in that position and needs to undertake a long and steady improvement process in order to reach that level of earnings per share growth, which I am not sure they can achieve given the macroeconomic background we are facing.
Therefore, I updated my discounted cash flow assessment for Dollar General and calculated that the company is worth $165 per share. The current market price is $126. Therefore, using this valuation method, the stock appears to be undervalued.
Therefore, I rated Dollar General stock as a buy opportunity and my last update was on April 7. I had a low level of confidence and weak conviction for the reasons I mentioned in this video.
And today, I repeat this prediction. It looks like a buying opportunity, but I'm not very confident about this business. I am not very confident about the long-term prospects of this opportunity.
Things look good at the moment, but I am not confident that the management team will be able to implement this plan.