No. of Recommendations: 15
When trying to assess an underlying trend, I find it's often more useful to see how something has been doing relative to other things, rather than how it has been doing in absolute terms. The trends frequently become much clearer and longer lasting. Here's a graph of the ratio, so a horizontal line would be market tracking:
One year
https://stockcharts.com/h-sc/ui?s=DG%3ARSP&p=D&yr=...Six months
https://stockcharts.com/h-sc/ui?s=DG%3ARSP&p=D&yr=...In the case of DG, it has been outperforming the average S&P 500 firm steadily since January 16-17. DG up 25.8%, S&P 500 Equal Weight Total return (tracked by RSP) down -4.12%. The superficial conclusion is that it has gone from perceived "loser" to "winner" category for the time being.
That all sounds pretty good, but the trend would have to last for ages before the DG disadvantage of recent years fully unwound.
For those already holding, the future probably won't be too bad compared to the past. Most observers think they'll make over $6 next year, current price is about 14 times that. They remain profitable and pretty recession resilient, so it's not like they're going out of business. Historically they were more in fashion and traded above 12X cash flow most of the time, which may be in the vicinity of $10/share for this year.
Jim
