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Dollar General Faces Stock Struggles Despite Future Growth

Dollar General is currently facing significant stock price struggles, down 70% over two and a half years. Despite this, the company's management forecasts EPS growth ahead, suggesting potential for recovery.

Date: 
AI Rating:   5

Stock Performance Overview

Dollar General (NYSE: DG) has experienced a drastic decline in stock value, down approximately 70% over the past 2.5 years, and has not reached an all-time high since late 2022. In contrast, the S&P 500 has seen significant fluctuations, currently down 9% from its peak.

Earnings Per Share (EPS)

Notably, Dollar General's earnings per share (EPS) have been a major concern, having been cut in half in recent years. For 2024, the EPS stands at $5.11, with management projecting a low-end EPS of $5.10 for 2025 and a potential high of $5.80. If achieved, this marks a nearly 14% year-over-year growth. Additionally, the management has set a long-term EPS growth forecast of at least 10% starting in 2026. This outlook provides a glimmer of hope for investors, suggesting a return to profit growth.

Profit Margins

The report highlights problems related to gross margins, which have declined due to inventory issues, including damage and theft. The decrease in gross margin might significantly affect the bottom line, particularly given that Dollar General's net sales exceed $40 billion annually. However, recent improvements in managing theft and other inventory challenges indicate potential stabilization.

Investor Sentiment

Despite the negative current market sentiment, the report suggests that turbulent conditions should not deter investment in Dollar General, particularly given its current low evaluation relative to future earnings.

Stocks:  DG