No. of Recommendations: 11
There's a thread on the BRK board going, started by rivervalley, on this one but I thought it could use a thread here.
As I type, the stock is now at around $153, roughly 41% down since its Oct. 2022 highs and about 24% down since the end of May. Last 4 quarters earnings are at $10.61. Current P/E is sub 15 (well below trend), with competitors such as DollarTree currently at 21.
I've been buying heavily since about $160. My thesis is simple -- DG is still growing at a remarkable clip (it's still the fastest growing retailer by store count, and has historically had gaudy ROE numbers), it makes piles of money, and is about as safely situated in the retail space as the bigger outlets such as Walmart for a host of reasons. Looks of some of its stores aside, I view it as the best in show business-wise of the dollar stores. I think (1) the hits on earnings growth are transient, and (2) if I'm wrong, the downside risk has been mostly eliminated due to the $100+ drop in share price since October.
That said, there's a lot in the recent earnings report to digest, including some real challenges/headwinds. Same store revenue growth was ~halved, expected sales growth was marked down to 3.5% and 5% (from 5.5% - 6%), EPS projections for the year are flat to -8%, debt service costs have increased, its higher margin discretionary item sales are dropping, the growth in DG stores, including its 'higher end' Popshelf stores, is being pulled back for these and like reasons, shrinkage/theft is up, competition in the space is increasing, etc.
I'm of the opinion that most of the negative is ephemeral or of the kind that DG has a long track record of addressing, and 5-10 years out DG will have a much larger footprint than it does today.
No. of Recommendations: 5
Just too many negatives right now for me.
Earnings estimates continue to be revised down.
Forward PEG is still high
Debt/Equity High as they keep adding debt
One ugly downtrend of a chart.
I think they will need a year or more to get these sorted out.
Love the ROE, dividend growth and buybacks.
No. of Recommendations: 1
I picked up a few shares at a little over $153 just so I can follow it better.
No. of Recommendations: 0
I'm watching this closely. Not quite ready to pull the trigger yet, but it seems like it and DLTR both make money, so why not own both?
No. of Recommendations: 7
For what it's worth Value Line runs a growth portfolio (The Aggressive Growth Model Portfolio).
Until this week DG was a component, but now they have dropped it, because:
We are also exiting our position in Dollar General, a dollar discount store. First-quarter same-store sales growth came in below expectations and management cut the revenue outlook for the year. The stock was down close to 20% on the day of the announcement. Dollar General appears to be losing market share to retail giant Wal-Mart and another dollar discount store, Dollar Tree. Pricing ought to remain competitive, as the macroeconomic environment puts pressure on the lower-income consumer. The company also does not plan to repurchase shares this year, which is a signal that there may well be more downside for the equity, in our view.
