Dollar General is a discount retailer, offering a selection of merchandise, including consumables, seasonal, home products and apparel across the U.S. The company was founded in 1939 and is based in Goodlettsville, Tennessee.
DG Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Dollar General Corp with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Dollar General Corp ranked in the 49th percentile in terms of potential gain offered. More precisely, our analysis suggests the stock is undervalued by approximately 4% on a DCF basis. The most interesting components of our discounted cash flow analysis for Dollar General Corp ended up being:
The company's debt burden, as measured by earnings divided by interest payments, is 25.27 -- which is good for besting 89.43% of its peer stocks (US stocks in the Consumer Defensive sector with positive cash flow).
Dollar General Corp's weighted average cost of capital (WACC) is 7%; for context, that number is higher than just 20.15% of tickers in our DCF set.
DG's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than just 20.15% of tickers in our DCF set.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
For other companies in the Consumer Defensive that have a similar discounted cashflow valuation profile (and ensuing price forecasts) as DG, try GHC, POST, CPB, BUD, and HMHC.
Neiman Marcus, J.C. Penney, GNC, True Religion, and J. Crew are just some of the names forced into bankruptcy since March, when the impact of COVID-19-related closures became overwhelming. No surprises here: Walmart (NYSE: WMT) has become something of a lifeline since COVID-19 took hold. Not only does it sell groceries and cleaning supplies that consumers desperately need, but it can bring those items to customers' cars with curbside pickup.
Barron's hosted a live event today with its retail reporters and BMO Capital analyst Simeon Siegel. In the discussion on the dollar store sector, Dollar General ([[DG]] -0.3%) was singled out by Barron's Teresa Rivas for the higher mix of business it generates from consumer essentials in contrast to Dollar...
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