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Dollar General (DG) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 mins read

Dollar General (DG) closed the most recent trading day at $200.73, moving +1.1% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.27%. Elsewhere, the Dow lost 0.31%, while the tech-heavy Nasdaq added 1%.

Heading into today, shares of the discount retailer had gained 5.1% over the past month, lagging the Retail-Wholesale sector's gain of 5.2% and the S&P 500's gain of 5.63% in that time.

Investors will be hoping for strength from DG as it approaches its next earnings release, which is expected to be August 27, 2020. The company is expected to report EPS of $2.34, up 34.48% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $8.18 billion, up 17.18% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.91 per share and revenue of $31.98 billion. These totals would mark changes of +32.39% and +15.24%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for DG. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.45% higher. DG is holding a Zacks Rank of #2 (Buy) right now.

Investors should also note DG's current valuation metrics, including its Forward P/E ratio of 22.27. Its industry sports an average Forward P/E of 26.89, so we one might conclude that DG is trading at a discount comparatively.

Meanwhile, DG's PEG ratio is currently 1.78. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Discount Stores industry currently had an average PEG ratio of 4.44 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 126, putting it in the top 50% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow DG in the coming trading sessions, be sure to utilize Zacks.com.


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