Shareholders of Dollar Tree, Inc. (NASDAQ:DLTR) will be pleased this week, given that the stock price is up 16% to US$110 following its latest quarterly results. Revenues were US$6.2b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.39 were also better than expected, beating analyst predictions by 19%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Dollar Tree from 25 analysts is for revenues of US$26.3b in 2022 which, if met, would be an okay 4.9% increase on its sales over the past 12 months. Per-share earnings are expected to surge 53% to US$6.20. Before this earnings report, the analysts had been forecasting revenues of US$26.1b and earnings per share (EPS) of US$5.79 in 2022. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 13% to US$120. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Dollar Tree analyst has a price target of US$140 per share, while the most pessimistic values it at US$92.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Dollar Tree's revenue growth is expected to slow, with forecast 4.9% increase next year well below the historical 7.8%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.4% next year. So it's pretty clear that, while Dollar Tree's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Dollar Tree following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Dollar Tree going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Dollar Tree , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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