Stock Market Crash: Is the Dollar General Buying?

Thanks to the Federal Reserve’s attempt to put the brakes on inflation, interest rates rose sharply, making 2022 a year to forget for investors. S&P 500The , perhaps the most watched stock market index, has lost 19% of its value. And investors are still navigating an uncertain environment today.

At times like these, investors should make it a priority to find a safe place to store their hard-earned capital.known for being recession-proof stocks, General Dollar (DG 0.10%) Worth a closer look now. Is this popular discount store chain the right place for your portfolio?

Dollar General has a lot to like

Investors have a lot to get excited about top retail stockIn 2022, Dollar General’s revenues will grow 10.6% year-over-year to total $37.8 billion. Same-store sales, the business’s key performance indicator, increased by 4.3%. Diluted earnings per share were also 5% higher than the 2021 figure.

Healthy growth in an environment where many companies are struggling is good news for investors. With the ability to generate stable free cash flow (FCF), Dollar General’s strong financial position gives shareholders peace of mind. In fact, Dollar General has long adopted shareholder-friendly practices. The annual dividend for this business increased from $0.88 in 2015 to $2.07 in 2022, a staggering 135% increase. And last year, the company bought back $2.7 billion of its stock.

But returning all that capital to investors doesn’t mean Dollar General’s growth prospects are bleak. The number of new stores to open in fiscal 2022 is 974, and as of February 3, 19,104 stores. Management plans to open 1,050 new stores in fiscal 2023, including 2,000 store renovations and 120 store relocations.

And management is optimistic for the time being. “Our outlook for this year includes strong sales and operating income, while also offering investments aimed at driving sustainable growth over the long term,” said his CFO John Garratt. (John Garratt) said in his release to the earnings press. We expect sales to increase by 5.5-6% in FY2023.

Stocks you can hold with confidence

One of Dollar General’s most compelling characteristics is the resilience of its business. This is something that investors should appreciate in a highly uncertain economic environment such as the one the US is currently facing. If a recession strikes in 2023, Dollar General is well-positioned to continue investing. solid numbers.

During the Great Recession, Dollar General’s revenues grew by double digits, up 10.1% in 2008 and 12.8% in 2009. Label products under $10. It can’t be beat, especially considering the range of items available.

And with its Popshelf initiative, which offers non-consumable items such as beauty products and home décor, and DG Fresh, which offers groceries, the business will encourage shoppers to visit more often and spend a lot of money to fill everything. We are also focused on adding a wider selection of merchandise that you can spend your money on. their needs. The benefit for Dollar General is higher wallet share and loyalty for customers. This will increase your revenue and profitability over time.

pay a fair price

Investors should also consider valuations before deciding to invest in stocks.As of this writing, Dollar General shares are at price earnings ratio The (P/E) ratio of 20 is lower than the average valuation over the past three and five years, but in line with the average P/E over the ten years. The stock trades at a modest premium to the S&P 500, with a P/E of less than 18.

Given all of this, I think it’s an accurate assumption to consider the stock to be fair at this point, based on both historical valuations and overall market levels. That being said, investors should instead focus on the favorable qualitative characteristics of this business. Dollar General is a stable and secure compounder that can provide an excellent foundation for anyone’s portfolio.

Neil Patel has no positions in any of the mentioned stocks. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.

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