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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 at $193.29 in the latest trading session, marking a +0.38% move from the prior day. The stock outpaced the S&P 500's daily gain of 0.27%. Meanwhile, the Dow gained 1.31%, and the Nasdaq, a tech-heavy index, lost 0.39%.

Coming into today, shares of the discount retailer had gained 2.93% in the past month. In that same time, the Retail-Wholesale sector gained 6.97%, while the S&P 500 gained 6.66%.

DG will be looking to display strength as it nears its next earnings release, which is expected to be August 27, 2020. On that day, DG is projected to report earnings of $2.33 per share, which would represent year-over-year growth of 33.91%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $8.15 billion, up 16.72% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.88 per share and revenue of $31.95 billion. These totals would mark changes of +31.95% and +15.11%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for DG. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. 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. Over the past month, the Zacks Consensus EPS estimate has moved 0.36% higher. DG is holding a Zacks Rank of #2 (Buy) right now.

Digging into valuation, DG currently has a Forward P/E ratio of 22. This represents a discount compared to its industry's average Forward P/E of 26.58.

Investors should also note that DG has a PEG ratio of 1.76 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Retail - Discount Stores industry currently had an average PEG ratio of 4.39 as of yesterday's close.

The Retail - Discount Stores industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 123, which puts it in the top 49% 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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