Fundamental Analysis: Dollar General Corp (NYSE:DG)


We look at Dollar General Corp (NYSE:DG) [Trend Analysisa company in the discount stores industry currently at the attention of investors, to assess if it provides value for investors considering buying or selling it. Currently Dollar General Corp is trading at $73.69 after moving up 2.09% in the previous day of trading.

DG is trading with a trailing 12 month P/E multiple of 19.26 and an estimated forward P/E multiple of 16.41. The stock has an estimated 5 year annual growth of 13.96% and a PEG multiple of 1.38.

Rather than the usual Price to Earnings (P/E) multiple method, we use a slightly different method to assess if Dollar General Corp is potentially a value buy for investors, the PEG ratio (P/E to growth). This PEG multiple takes into account the expected long term growth in earnings of the company rather than merely the growth for one earnings period ahead as forward P/E does.

That is to say, P/E simply doesn’t account for the long term prospects of DG. As a rule of thumb, a stock with a PEG of between 0 and 1 is usually considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of DG being 1.38, we consider Dollar General Corp to likely be priced at fair value.

This analysis means that value buyers who do not currently hold Dollar General Corp (NYSE:DG) should probably look for better value alternatives and investors currently holding the stock should either continue to hold or sell and look for alternatives.

The mean analyst 12 month target price for Dollar General Corp (NYSE:DG) is currently $81.74 or 10.92% above the current price. Additionally, the stock has been as high as $81.42 and as low as $59.75 in the last 52 weeks. Analysts are estimating that DG will report earnings per share of $0.96 next quarter.

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