Subject: Re: FKA: DG
This has now fallen to about $116. I posted what I think is a good write up on some of the problems plaguing the company in the DG board, which I suspect some here don't follow:

https://guastywinds.substack.c...

I have some serious reservations about the firm, and should probably know better than to try and predict retail, but a 55% drop from Nov 22 (when CEO Owens took over) builds in a lot of pessimism.

Consider the following back of the envelop assumptions, going forward:


Sales	        $37,845 (2022 sales, i.e., a likely underestimate)
Op. Margin	8.30% (a return to 2018 op margins, which were a pre-2023 low-point)
Income	        $3,141
Interest	$337 (4 times 2023 2Q interest debt service)
EBT	        $2,804
Tax Rate	23.0% (2Q came in at 22.9%, 2022 was 22.5%, 2021 was 21.7%)
Tax Expense	$645
Net Profit	$2,159
	
Current Price / Share	        $116.08
Shares Outstanding              220 000 000
Proj./normalized EPS	        $9.81
Normalized P/E	                11.8

If one conservatively multiplies the above earnings by today's multiple of forward projected earnings, i.e., about 15.2 (based on the midpoint of 2023 guidance, $7.60), that's still a price of $149.11, or about 29% from here.

The critical assumption, of course, is that operating margins return to something approximating their previous range in 2017 - 2019 (where they sat at 8.3% - 8.6%, subsequent to a long era of 9%+).