By Rob Otman
Dollar General (NYSE: DG) is a $21 billion company today. Investors that bought shares one year ago are sitting on a -16.59% total return. That’s below the S&P 500’s return of 13.51%.
Dollar General stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
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✗ Earnings-per-Share (EPS) Growth: Dollar General reported a recent EPS growth rate of -0.97%. That’s below the multiline retail industry average of 52.94%. That’s not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the multiline retail industry is 30.8. And Dollar General’s ratio comes in at 16.63. It’s trading at a better value than many of its competitors.
✓ Debt-to-Equity: The debt-to-equity ratio for Dollar General stock is 54.86%. That’s below the multiline retail industry average of 167.07%. The company is less leveraged.
✗ Free Cash Flow per Share Growth: Dollar General’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✗ Profit Margins: The profit margin of Dollar General comes in at 4.98% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Dollar General’s profit margin is below the multiline retail average of 7.83%. So that’s a negative indicator for investors.
✗ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Dollar General is 24.38%, and that’s equal to its industry average ROE of 24.38%.
Dollar General stock passes two of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold With Caution.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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Source:: Investment You
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