Dollar General
DG
$127.05
-0.35%
Dollar General Corp. is the largest dollar store operator in the United States, operating over 20,000 small-box discount stores across 48 states, primarily serving rural and low-income markets with a focus on consumables (82% of sales). The company's competitive identity is rooted in its deep penetration of underserved areas, offering everyday low prices on a curated assortment of 11,000 SKUs, including 2,000 items priced at $1 or less. The current investor narrative centers on margin recovery and earnings growth, as Dollar General raised its earnings outlook in June 2026 despite a slight sales miss, while concerns about slower sales growth and consumer headwinds persist. The stock's recent volatility reflects a tug-of-war between defensive retail demand and cautious forward guidance.…
DG
Dollar General
$127.05
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Investment Opinion: Should I buy DG Today?
Rating: Buy. Dollar General offers a compelling risk/reward at current levels, with a forward P/E of 14.6x (below its 5-year average of 22x) and a PEG ratio of 0.61x, indicating undervaluation relative to expected earnings growth. The consensus analyst rating is Buy with an average target of $130.90, implying 11.7% upside. Supporting evidence includes: (1) net income growth of 13.3% YoY in Q1 2026, (2) gross margin expansion to 31.6% from 31.0%, (3) free cash flow yield of ~9.2%, and (4) a defensive business model with beta of 0.247. The stock is undervalued relative to its own history and peers on a forward basis. Key risks that could invalidate the thesis: (1) further deceleration in revenue growth below 3%, (2) margin compression from rising costs or competition, and (3) a broader recession that pressures low-income consumers. This Buy rating would be downgraded to Hold if revenue growth falls below 2% or if the forward P/E expands above 18x without corresponding earnings growth. The stock is currently undervalued based on forward P/E and PEG ratio.
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DG 12-Month Price Forecast
Dollar General's valuation is compelling, with a forward P/E of 14.6x and PEG of 0.61x, both well below historical and peer averages. The company is executing well on margins, with net income up 13.3% YoY, and raised guidance signals management confidence. However, the stock's 6-month downtrend and decelerating revenue growth warrant caution. The base case of 3-4% revenue growth and margin expansion supports the analyst average target of $130.90, offering 11.7% upside. The bull case (30% probability) could see the stock reach $140-$175 if growth reaccelerates, while the bear case (25% probability) could push it to $90-$110 if consumer headwinds intensify. The stance is bullish with medium confidence, as the valuation discount provides a margin of safety, but confirmation of sustained revenue growth is needed for higher conviction.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Dollar General's 12-month outlook, with a consensus price target around $130.90 and implied upside of +3.0% versus the current price.
Average Target
$130.90
0 analysts
Implied Upside
+3.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$90 - $175
Analyst target range
Dollar General is covered by 29 analysts, with a consensus recommendation of 'Buy' (mean rating 2.45 on a 1-5 scale, where 1 is Strong Buy). The average price target is $130.90, implying approximately 11.7% upside from the current price of $117.23. The distribution leans bullish, with the majority of ratings being Buy or Overweight, though several firms rate it Hold/Neutral. Recent ratings actions have been largely neutral, with firms like Evercore, Barclays, and Truist maintaining their positions after the June earnings report, indicating a wait-and-see approach.
The target price range spans from a low of $90.00 to a high of $175.00, a wide spread of $85 that reflects high uncertainty about the company's future. The high target of $175 assumes a return to stronger growth, margin expansion, and multiple expansion, likely driven by successful store remodels and market share gains. The low target of $90 implies significant downside, pricing in continued sales deceleration, margin compression from competition, and potential economic recession. The wide spread suggests analysts have divergent views on the company's ability to navigate the current retail environment, and the stock's volatility may persist until clearer trends emerge.
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Bulls vs Bears: DG Investment Factors
Dollar General presents a mixed picture: the bull case rests on margin recovery, attractive forward valuation (14.6x P/E, 0.61x PEG), and a defensive business model with low beta (0.247). The bear case highlights decelerating revenue growth (3.4% in Q1), a sustained downtrend (-20.2% over 6 months), and elevated debt (D/E 1.85). Currently, the bull case has stronger evidence due to the significant valuation discount and raised guidance, but the key tension is whether margin expansion can offset slowing top-line growth. If revenue growth stabilizes or accelerates, the stock could re-rate higher; if it continues to decelerate, the forward P/E multiple may compress further.
Bullish
- Margin Recovery Driving EPS Growth: Gross margin expanded 60 bps YoY to 31.6% in Q1 2026, and operating margin improved to 5.9% from 5.5%. This drove net income up 13.3% YoY to $444M, with EPS of $2.02 vs $1.78, demonstrating operational leverage.
- Compelling Forward Valuation: Forward P/E of 14.6x is well below the 5-year average of 22x and the industry forward average of 16x. The PEG ratio of 0.61x suggests the stock is undervalued relative to expected earnings growth.
- Raised Guidance Signals Confidence: Management raised its earnings outlook in June 2026 despite a slight sales miss, indicating confidence in margin improvement and cost control. The raised outlook supports the consensus EPS estimate of $10.16 for fiscal 2026.
- Defensive Business Model with Low Beta: Beta of 0.247 makes DG one of the least volatile stocks in the market, providing downside protection during economic uncertainty. The focus on consumables (82% of sales) and low-income consumers supports steady demand.
Bearish
- Sales Growth Deceleration: Revenue growth slowed to 3.4% YoY in Q1 2026 from 5.9% in Q4 2025 and 5.1% in Q2 2025. The deceleration is driven by softer demand in seasonal and home categories, raising concerns about top-line momentum.
- Stock in Sustained Downtrend: DG is down 20.2% over the past six months and trades at 74.1% of its 52-week range. Relative strength vs. S&P 500 is deeply negative across all timeframes, indicating persistent underperformance.
- Elevated Debt-to-Equity Ratio: Debt-to-equity of 1.85x is high for a retailer, and interest expense of $47.2M in Q1 2026 consumes a meaningful portion of operating income. While manageable, it limits financial flexibility.
- Wide Analyst Target Range: Analyst targets range from $90 to $175, a spread of $85 reflecting high uncertainty. The low target implies 23% downside from current levels, and several analysts maintain Hold ratings, suggesting a lack of conviction.
DG Technical Analysis
Dollar General is in a sustained downtrend over the past six months, with the stock down 20.2% in that period and trading at $117.23, which is 74.1% of its 52-week range (low $95.11, high $158.23). The 1-year price change of +8.8% masks significant weakness, as the stock has fallen from near its 52-week high in early 2026 to current levels, indicating a loss of momentum and a shift from an uptrend to a bearish phase. The current price near the lower end of the range suggests the market is pricing in ongoing headwinds, though it could also represent a value opportunity if fundamentals stabilize.
Short-term momentum is mixed but shows tentative signs of stabilization. The 1-month price change is -1.6%, a notable improvement from the 3-month change of -2.9% and the 6-month decline of -20.2%, suggesting the pace of selling is decelerating. However, the stock's relative strength versus the S&P 500 is deeply negative across all timeframes (1-month -2.4%, 3-month -6.4%, 6-month -27.4%), indicating persistent underperformance. The divergence between the improving 1-month trend and the still-negative longer-term trend could signal a potential bottoming process, but confirmation is needed.
Key support lies at the 52-week low of $95.11, a break below which would signal further downside and potentially test the $90 area. Resistance is at the 52-week high of $158.23, and a breakout above that level would indicate a reversal of the downtrend. The stock's beta of 0.247 is significantly lower than the market, meaning it is about 75% less volatile than the S&P 500, which is unusual for a retailer and suggests the stock's price movements are less sensitive to broad market swings. This low beta may reflect the defensive nature of the business, but it also means the stock may lag in a market rally.
Beta
0.25
0.25x market volatility
Max Drawdown
-34.9%
Largest decline past year
52-Week Range
$95-$158
Price range past year
Annual Return
+21.1%
Cumulative gain past year
| Period | DG Return | S&P 500 |
|---|---|---|
| 1m | +10.3% | +0.2% |
| 3m | +11.0% | +3.7% |
| 6m | -11.4% | +8.0% |
| 1y | +21.1% | +18.2% |
| ytd | -7.1% | +9.6% |
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DG Fundamental Analysis
Dollar General's revenue trajectory shows steady but decelerating growth. In the most recent quarter (Q1 2026, ended May 1, 2026), revenue was $10.79 billion, up 3.4% year-over-year, compared to 2.8% growth in the prior year's Q1. However, the multi-quarter trend reveals a slowdown: Q4 2025 revenue grew 5.9% YoY, Q3 2025 grew 4.6%, and Q2 2025 grew 5.1%. The deceleration is driven by consumables (82% of sales) which grew modestly, while seasonal and home products segments showed softer demand. The investment case hinges on whether the company can sustain mid-single-digit revenue growth through store expansion and market share gains in a challenging consumer environment.
Profitability is improving, with net income of $444 million in Q1 2026, up from $392 million in Q1 2025, a 13.3% increase. Gross margin expanded to 31.6% from 31.0% a year ago, driven by better inventory management and lower freight costs. Operating margin improved to 5.9% from 5.5%, reflecting cost controls. The net margin of 4.1% is healthy for a discount retailer and above the industry average of around 3%. The company is profitable and generating consistent earnings, with EPS of $2.02 in Q1 2026 versus $1.78 in the prior year, a 13.5% increase.
Dollar General maintains a solid balance sheet with a current ratio of 1.13, indicating adequate short-term liquidity. Free cash flow (FCF) was $365 million in Q1 2026, down from $556 million in Q1 2025 due to higher capex, but the trailing twelve-month FCF is $2.89 billion, providing ample cash for dividends and debt reduction. The debt-to-equity ratio of 1.85 is elevated but manageable given the company's stable cash flows. ROE is 17.8%, reflecting efficient use of equity. The company's FCF yield (FCF/market cap) is approximately 9.2%, which is attractive and supports the dividend (yield 1.6%).
Quarterly Revenue
$10.8B
2026-05
Revenue YoY Growth
+3.4%
YoY Comparison
Gross Margin
31.6%
Latest Quarter
Free Cash Flow
$2.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is DG Overvalued?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 20.9x, while the forward P/E is 14.6x, a significant discount that implies the market expects earnings growth. The gap between trailing and forward P/E suggests analysts anticipate a 30%+ earnings increase over the next year, which is aggressive but supported by the company's raised guidance. The PEG ratio of 0.61x indicates the stock is undervalued relative to its expected earnings growth rate, typically a bullish signal.
Compared to the discount stores industry, Dollar General trades at a premium on a P/E basis. The industry average trailing P/E is approximately 18x, so DG's 20.9x represents a 16% premium. However, the forward P/E of 14.6x is below the industry forward average of 16x, suggesting the market is pricing in above-average growth. The premium is partially justified by Dollar General's superior margins (net margin 4.1% vs. industry ~3%) and dominant market position, but the premium narrows on a forward basis, indicating some skepticism about growth sustainability.
Historically, Dollar General's trailing P/E of 20.9x is near the lower end of its 5-year range (which has spanned from 12x to 28x). The current multiple is below the 5-year average of around 22x, suggesting the stock is relatively cheap by its own history. This could indicate a value opportunity if the company's earnings trajectory improves, but it also reflects the market's concerns about slower growth and competitive pressures. The P/B ratio of 3.7x is also below its historical average of 5x, further supporting the view that the stock is trading at a discount to its own valuation history.
PE
20.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 13x~28x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Dollar General's debt-to-equity ratio of 1.85x is elevated, and interest expense of $47.2M in Q1 2026 consumes about 7.4% of operating income. While free cash flow of $2.89B TTM provides coverage, any sustained margin compression could strain debt service. Revenue growth deceleration from 5.9% in Q4 2025 to 3.4% in Q1 2026 is a key risk, as slower top-line growth makes it harder to achieve operating leverage. The company's heavy reliance on consumables (82% of sales) limits margin expansion potential, as these categories have lower margins than seasonal or home products.
Market & Competitive Risks: DG trades at a forward P/E of 14.6x, a discount to the industry forward average of 16x, but the stock's 6-month decline of 20.2% reflects market skepticism about growth sustainability. Competition from Walmart and other dollar stores is intensifying, as evidenced by reports of market share shifts during the affordability crunch. The low beta of 0.247 means DG may lag in a market rally, and the wide analyst target range ($90-$175) signals high uncertainty. Regulatory risks include potential minimum wage increases and trade tariffs that could impact costs.
Worst-Case Scenario: A severe recession could accelerate sales deceleration, forcing margin contraction and earnings downgrades. If revenue growth falls below 2% and operating margins slip below 5%, the stock could test the 52-week low of $95.11, representing a 19% downside from the current price of $117.23. In an extreme scenario, a break below $95 could lead to a decline toward $90 (the analyst low target), implying a 23% loss. The historical max drawdown of 34.88% suggests that in a worst-case recession, the stock could fall to approximately $76, though this is less likely given the defensive nature of the business.
FAQ
The key risks for Dollar General are: (1) Revenue deceleration — growth slowed to 3.4% in Q1 2026 from 5.9% in Q4 2025, and further slowing could pressure earnings and multiples. (2) High debt — debt-to-equity of 1.85x is elevated, and interest expense of $47.2M per quarter reduces net income. (3) Competitive pressure — Walmart and other discounters are aggressively targeting the same low-income consumer, as highlighted in recent market share reports. (4) Consumer headwinds — the core customer base is sensitive to inflation and fuel costs, which could dampen demand. The most severe risk is a recession that accelerates sales deceleration and margin compression, potentially driving the stock to the analyst low target of $90 (23% downside). The stock's low beta (0.247) provides some cushion, but it also means DG may lag in a market rally.
The 12-month forecast for Dollar General is moderately bullish, with a base case target of $120-$140 (45% probability), aligning with the analyst average of $130.90. This scenario assumes 3-4% revenue growth and continued margin expansion, driving EPS toward the consensus estimate of $10.16. The bull case (30% probability) targets $140-$175, driven by reacceleration in sales and operating margins above 6.5%. The bear case (25% probability) sees the stock falling to $90-$110 if consumer spending weakens and margins contract. The AI assessment is bullish with medium confidence, citing the attractive forward P/E (14.6x) and PEG ratio (0.61x) as key supports. The most likely outcome is a gradual recovery toward $130 as the company executes on its margin initiatives, but the wide target range reflects uncertainty about the pace of revenue growth.
Dollar General is undervalued based on forward earnings and growth expectations. The forward P/E of 14.6x is well below the 5-year average of 22x and the industry forward average of 16x. The PEG ratio of 0.61x (based on expected EPS growth of ~24%) suggests the stock is cheap relative to its growth rate. The trailing P/E of 20.9x is above the industry average of 18x, but this premium is justified by DG's superior net margin (4.1% vs. industry ~3%). The P/B ratio of 3.7x is also below its historical average of 5x. The market appears to be pricing in concerns about slowing growth, but the valuation implies that if the company delivers on its raised guidance, the stock has significant upside. The discount to history and peers makes it an attractive value proposition.
Dollar General appears to be a good buy for value-oriented investors with a medium-term horizon. The stock trades at a forward P/E of 14.6x, a significant discount to its 5-year average of 22x, and offers a PEG ratio of 0.61x, indicating undervaluation relative to expected earnings growth. The consensus analyst target of $130.90 implies 11.7% upside, and the company is generating strong free cash flow ($2.89B TTM) with a yield of ~9.2%. However, the stock is in a downtrend (-20.2% over 6 months) and faces risks from decelerating revenue growth (3.4% in Q1) and elevated debt (D/E 1.85). For investors comfortable with these risks, the current valuation provides a margin of safety. It is a better fit for long-term holders than short-term traders due to its low beta (0.247) and defensive business model.
Dollar General is better suited for long-term investment due to its defensive business model, low beta (0.247), and attractive valuation. The company's focus on consumables and low-income consumers provides steady demand through economic cycles, making it a portfolio stabilizer. The dividend yield of 1.6% and strong free cash flow ($2.89B TTM) support income generation. Short-term trading is less favorable given the stock's low volatility and the current downtrend; the 6-month decline of 20.2% suggests momentum is against it. A minimum holding period of 12-18 months is recommended to allow the margin recovery story to play out and for the valuation discount to close. Long-term investors can benefit from the PEG ratio of 0.61x, which implies the stock is cheap relative to its growth potential, and the company's history of consistent earnings growth.
