Halls of Shrewd'm / US Policy❤
No. of Recommendations: 19
Great piece over @Rational Walks sub-stack,
https://rationalwalk.substack.com/p/dollar-general...Investing legends Seth Klarman, Thomas Gayner, and Jim all have positions in this stock.
It's a shame acrimonious posters chased RW away and now maybe Jim as well? I hope not. :(
Choose kindness folks, it makes for a happier life!
No. of Recommendations: 1
Great piece over @Rational Walks sub-stack,
Paywalled. Ravi seems to go back and forth on charging for content. Currently $10/month.
No. of Recommendations: 3
Rationalwalk is a star.
I subscribe to his substack. A value.
No. of Recommendations: 29
'It's a shame acrimonious posters chased RW away'
Interesting thing for me on the 'shade' placed on Mungofitch last week. I was not aware of previous comments and had thought it was a criticism of my post and me. From memory it was referring to parenting tone and boring float discussion.
It felt pretty crap when I thought it was me and was equally sorry to learn it was directed at Mungofitch and it was not the first time.
I am taking solace in the belief that Mungofitch is rational enough to know that online comments are a blunt tool for human interaction and certainly inefficient. Online comments are just so prone to misunderstanding. Brains trying to sync. Arguing your case back and forth would be almost impossible.
I don't get why making personal comments would be useful here. I am sure most people are interested in investing facts, opinions and experiences. And they want them from anyone willing to contribute. We can all assess and take from them what we wish.
To criticise the most generous poster is odd. If anyone already knows the content. It's the old online story. You don't have to read it. It might not have been for your benefit.
No. of Recommendations: 26
I'm fairly certain that an advanced brain like Jim/Mungo is fully aware that posters who constantly tear him down are hoping he will leave so they can claim his spotlight. (ha -- fat chance, those posters have the charm of petulant children crying for attention). He isn't about to give them what they want. He's always been a man of the people, the courteous people who see trolling as an unfortunate byproduct of sad childhoods or something like that. I'm sure he'll write when he has something to say.
SD
No. of Recommendations: 0
I couldn't see past the paywall.
What is RWs current Intrinsic value for DG?
The summary mentioned 15 dollars per share and a terminal value of 20 x times earnings in 5 years
That would be 300$ if you want 12% that's 170 IV now or 15% that's 149 now (for present value)
Given risks and outlook we'd probably want a slightly higher return (15%) so c130 suggests it's trading at a 12% discount to intrinsic value?
No. of Recommendations: 0
I'd taken 8.8 eps as a 5 year average to be conservative, grown that by 8% so 12.93 in 5 years with a terminal of 18, equates to 232.. 15% PA equates to a value now of 114$ per share.
Thoughts?
No. of Recommendations: 28
I'd taken 8.8 eps as a 5 year average to be conservative, grown that by 8% so 12.93 in 5 years with a terminal of 18, equates to 232.. 15% PA equates to a value now of 114$ per share.
Thoughts?
I think you'll feel better about your guess by coming at the future earnings in terms of what you think the revenues per share will be, and what both will be in future, then multiplying the two.
The historical figures probably can't be simply extrapolated, but their general levels will certainly give you a starting point for reasonableness.
First, sales:
I don't see any reason to suspect that sales per share will fall in real terms. Last four quarters of sales, divided by current share count, were about $176.40. Flat real sales seems pretty conservative given that they are still opening roughly 900 stores per year. With the current counts, absent other big changes, that should in theory give 4%/year in real top line sales growth over the next 4 years if kept up.
Second, net profit margins:
Net margins could certainly fall. Maybe some part cyclical from the interest rate cycle, maybe some part permanent for conservatism because of permanently higher labour costs or rising corporate tax rates. (they are one of the few firms that pays near the headline rate--above it, in fact) Net profit margins have ranged from 5.2% to 7.8% in the last decade, average 6.18%. So you could pencil in a new low as the future average for a solid amount of conservatism.
I think that would be a more prudent approach to a margin of safety than using the historical average earnings, even if it gave the same number for current earnings by coincidence.
And of course, try to do it all in after-inflation numbers. Those are the only ones that you can spend on "stuff" that always has inflation-adjusted prices.
As for whether your forecast overall makes sense, sounds fine to me. I think it seems to be towards the conservative end of plausible. I'm a bit more optimistic. I think that before too long they'll be doing $11/share in today's money (maybe $200/share real revenue run rate at net profit margins of 5.5%). Gut feel 12-18 months out? 24 with bad luck? Market multiples will probably vary a lot, but should be above 20 some of the time thereafter unless the business really gets stuck in the mud for some reason I can't foresee. That give a price target of $220, with timing uncertain. If it takes 3 years (just an example), that's a real total return of inflation + 21.6%/year. If it takes six years, inflation + 11.2%/year.
Jim
No. of Recommendations: 4
Yes potentially re margins. Although I also read that buyers in the US are going back to the supermarkets and are concentrating on food purchases as inflation bites and impulse purchases where DG and others make their higher margins are not as popular.
Anecdotally
When I was in Florida I ended up food shopping at Aldi, I preferred this to Publix, less choice and far less expensive. Walmart was too big and chaotic for me. I also like to eat a relatively clean diet with plenty of fruit and veg. Walmart is ridiculous with its sweet and cereal aisles etc, how many varieties do you need!?
Lidl and Aldi are hitting it out of the park in the UK and have grown market share 12% each over the past year. Biggest losers are the premium online retailers and Morrison and Asda and Sainsbury(Morrison down 9% and Asda down 5%) Tesco are holding their own.
