Dollar General
DG
$118.94
+0.01%
Dollar General Corp. is the largest dollar-store operator in the United States, running more than 20,000 small-box discount stores across 48 states and generating over $42 billion in fiscal 2025 sales. Its assortment of roughly 11,000 SKUs — heavily weighted toward consumables (82% of sales), with seasonal (10%), home (5%), and apparel (3%) categories, and more than 20% private label — positions it as a value-focused, rural-market retailer that big-box competitors largely underserve. The current investor debate centers on whether the company's margin-recovery story can offset slowing top-line growth: recent headlines highlight that margin gains and an earnings-outlook raise were overshadowed by a sales miss and guidance for slower growth ahead, leaving the stock in a "show-me" phase. At the same time, the broader dollar-store group has drawn attention as a tariff-refund and trade-down beneficiary, with peers like Dollar Tree lifting guidance, keeping DG in the conversation as a defensive consumer play.…
DG
Dollar General
$118.94
Related headlines
Investment Opinion: Should I buy DG Today?
Rating: Hold with a constructive bias. The core thesis is that DG is a cash-generative, defensive retailer undergoing a credible margin recovery, but revenue growth of just 3.36% and a 6-month relative-strength gap of -15.09 versus SPY mean the market is demanding proof of durable top-line acceleration before re-rating the multiple. The analyst consensus of 'buy' (mean 2.43) and average target of $140.76 imply 12.8% upside, but the wide $90–$176 range reflects genuine uncertainty.
Supporting evidence: (1) Valuation is undemanding — 15.08x forward PE, 0.74x P/S, and a PEG of 0.61, all below or near multi-year lows; (2) profitability is improving — gross margin up 66 basis points year over year to 31.62% and net margin up 36 basis points to 4.12%; (3) free cash flow is robust at $2.892 billion TTM, a 9.2% yield, comfortably covering the 1.65% dividend (34.4% payout); and (4) the balance sheet, while levered at 1.85x debt-to-equity, is supported by consistent operating cash flow of $716.2 million in Q1 alone. These metrics suggest the stock is priced for stagnation, not disaster.
Risks and conditions: The biggest risks are (1) revenue growth decelerating below 3%, which would undermine the margin-recovery narrative; (2) gross margin failing to hold above 31%, which would compress earnings; and (3) competitive pressure from Walmart and Dollar Tree eroding traffic. This Hold would upgrade to Buy if revenue growth reaccelerates above 4% while gross margin holds above 31.5%, or if the stock pulls back toward $110 (forward PE ~10.5x). It would downgrade to Sell if revenue growth turns negative or if gross margin falls below 30%. On balance, DG appears fairly valued to modestly undervalued relative to its own history and peers, but the lack of a near-term catalyst justifies patience.
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DG 12-Month Price Forecast
DG presents a classic 'show-me' story: the margin recovery is real and cash generation is strong, but revenue growth of 3.36% and a -15.09 six-month relative-strength gap versus SPY mean the market is not yet convinced the top line can accelerate. The valuation is undemanding at 15.08x forward PE and a 0.61 PEG, which limits downside if the base case holds, but the wide analyst target range and mostly Hold/Neutral institutional actions suggest a lack of near-term catalysts. I would upgrade to bullish if comps reaccelerate above 4% while gross margin holds above 31.5%, and downgrade to bearish if revenue growth falls below 2% or gross margin slips below 30.5%. For now, the risk/reward is balanced, favoring a neutral stance with a slight value bias.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Dollar General's 12-month outlook, with a consensus price target around $140.93 and implied upside of +18.5% versus the current price.
Average Target
$140.93
0 analysts
Implied Upside
+18.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$90 - $176
Analyst target range
Coverage is robust, with 29 analysts following the stock. The consensus recommendation is "buy" with a recommendation mean of 2.43 (on a scale where lower is more bullish), and the average target price of $140.76 implies roughly 12.8% upside from the current $124.84. Sentiment is constructive but not euphoric — the recent institutional ratings flow shows mostly Hold/Neutral/Equal Weight actions from firms including Truist, Citigroup, Piper Sandler, Morgan Stanley, and Loop Capital, with Barclays maintaining Overweight and Freedom Broker the only recent downgrade (Buy to Hold), indicating analysts see value but are waiting for clearer growth catalysts.
The target range is wide, from a low of $90.00 to a high of $176.00 — a 96% spread that signals high uncertainty about the growth trajectory. The high target of $176 (about 41% above the current price) would require multiple expansion back toward historical norms plus accelerating comps and margin gains, while the low target of $90 (roughly 28% below) prices in margin compression, continued sales deceleration, and competitive pressure from Walmart and dollar-store peers. The consensus EPS estimate of $10.48 (range $10.36–$10.59) and revenue estimate of $51.84 billion (range $51.39–$52.29 billion) are tightly clustered, suggesting analysts agree on near-term numbers but disagree sharply on the multiple the market should pay — a classic setup for a stock that will be driven by guidance revisions rather than estimate dispersion.
Bulls vs Bears: DG Investment Factors
The bear case currently has stronger near-term evidence: revenue growth of just 3.36% is decelerating, the stock is a significant market laggard over 6 months (-15.09 relative strength vs. SPY), and leverage at 1.85x debt-to-equity limits flexibility. However, the bull case is underpinned by tangible margin recovery (gross margin up 66 basis points year over year to 31.62%), a 9.2% FCF yield, and a PEG of 0.61 that suggests the market is pricing in far too much pessimism. The single most important tension is whether margin gains can be sustained and eventually translate into revenue acceleration — if comps reaccelerate above 4% while gross margins hold above 31%, the stock could re-rate toward the $140–$176 range; if revenue growth stalls below 3% and margins plateau, the $90–$100 bear targets come into play. With a beta of 0.235, DG is a defensive holding, but the -34.88% max drawdown shows it is not immune to sharp idiosyncratic selloffs.
Bullish
- Margin recovery is real and accelerating: Gross margin expanded to 31.62% in Q1 FY2026 from 30.96% a year earlier, and has climbed steadily from 29.40% in Q4 FY2024. Net income rose to $444.1 million from $391.9 million, with net margin improving to 4.12% from 3.76%, confirming that shrink control, private-label mix, and lower freight costs are flowing through to the bottom line.
- Deep valuation discount with PEG below 1: DG trades at 20.88x trailing PE and 15.08x forward PE, with a PEG ratio of 0.61 — well below the 1.0 threshold that typically signals undervaluation relative to expected growth. The 0.74x price-to-sales and 14.24x EV/EBITDA are below consumer-defensive retail averages, and the stock sits near the bottom of its own multi-year valuation band after an 88% de-rating in P/S since Q3 FY2022.
- Strong free cash flow and covered dividend: TTM free cash flow of $2.892 billion against a $31.6 billion market cap implies a roughly 9.2% FCF yield, and Q1 FY2026 operating cash flow of $716.2 million comfortably covered $351.6 million of capex. The 1.65% dividend yield carries a conservative 34.4% payout ratio, leaving ample room for continued investment and potential dividend growth.
- Analyst consensus sees 12.8% upside: With 29 analysts covering the stock, the consensus recommendation is 'buy' (mean 2.43) and the average target price of $140.76 implies 12.8% upside from $124.84. The high target of $176 (41% above current) reflects a path to multiple expansion if comps and margins inflect, while the tightly clustered EPS estimates ($10.36–$10.59) suggest near-term numbers are well understood.
Bearish
- Revenue growth is decelerating sharply: Q1 FY2026 revenue grew just 3.36% year over year to $10.787 billion, and the last four quarters have hovered in a narrow $10.6–10.9 billion band, indicating essentially flat sequential performance. Management has guided for slower growth ahead, and the March 2026 selloff was triggered precisely by this disappointing outlook.
- Heavy leverage constrains financial flexibility: Debt-to-equity stands at 1.85x with total-debt-to-capitalization at 64.1%, and the current ratio of 1.13 is adequate but not comfortable. A quick ratio of 0.25 underscores heavy reliance on inventory, leaving little cushion if consumer demand weakens or inventory write-downs occur.
- Consumables mix caps operating leverage: Consumables account for $8.892 billion of Q1 revenue (82% of sales), while higher-margin seasonal, home, and apparel categories contribute just $1.084 billion, $523 million, and $287 million respectively. This low-margin mix structurally limits operating leverage, and operating margin of 5.16% remains thin for retail.
- Significant market laggard over 6 months: DG is up 6.56% over six months versus SPY's 21.65% gain, a -15.09 relative-strength gap, and year-to-date the stock is down 8.76% against SPY's 13.11% gain (-21.87 relative strength). The recovery has stalled, and the stock sits only 47% up its 52-week range, signaling neither momentum nor deep-value support.
DG Technical Analysis
Dollar General is in a choppy but constructive recovery trend, with the shares up 21.38% over the past year versus a 17.22% gain for SPY, a relative-strength spread of +4.16 points. At a current price of $124.84, the stock sits roughly 47% of the way up its 52-week range of $95.11 to $158.23 — closer to the middle than either extreme, which signals neither momentum-driven overextension nor deep-value distress. Notably, the year-to-date change is -8.76%, meaning the trailing 12-month gain was largely earned in the back half of 2025 and has since been partially given back, a classic recovery that has stalled rather than a clean uptrend.
Short-term momentum is modestly positive but decelerating: the stock is up 1.68% over the past month and 4.46% over three months, both trailing SPY's 0.69% and 5.81% respective moves, producing relative-strength readings of 0.99 (1-month) and -1.35 (3-month). The 6-month picture is the real divergence — DG is up 6.56% while SPY has gained 21.65%, a -15.09 relative-strength gap that shows the stock has been a significant market laggard through the spring and summer. The 1-month turn positive against a negative 3-month and deeply negative 6-month trend suggests early mean-reversion interest rather than a confirmed trend reversal, and the modest 2.25 short ratio indicates bears are not aggressively pressing the position.
Key technical levels are well defined: the 52-week low at $95.11 is the critical support zone (roughly 24% below the current price), while the 52-week high at $158.23 represents resistance about 27% above. A breakout above $158 would confirm a full trend reversal and likely require fundamental re-rating, whereas a breakdown below $95 would signal the recovery has failed and open deeper downside. Volatility is unusually low for a single stock — beta of just 0.235 means DG moves roughly 76% less than the market, making it a defensive holding that dampens portfolio swings but also limits upside torque; position sizing can therefore be larger than a high-beta name, though the -34.88% max drawdown shows the stock is not immune to sharp, idiosyncratic selloffs.
Beta
0.23
0.23x market volatility
Max Drawdown
-34.9%
Largest decline past year
52-Week Range
$95-$158
Price range past year
Annual Return
+17.3%
Cumulative gain past year
| Period | DG Return | S&P 500 |
|---|---|---|
| 1m | -9.1% | +0.6% |
| 3m | +0.7% | +3.3% |
| 6m | -0.7% | +17.4% |
| 1y | +17.3% | +15.0% |
| ytd | -13.1% | +12.9% |
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DG Fundamental Analysis
Revenue growth is positive but decelerating. The most recent quarter (Q1 FY2026, ended 2026-05-01) delivered revenue of $10.787 billion, up 3.36% year over year, a slowdown from the prior-year Q1 comparison and consistent with management's guidance for slower growth ahead. The multi-quarter trend shows revenue hovering in a $10.6–10.9 billion band across the last four quarters ($10.727B, $10.649B, $10.911B, $10.787B), indicating essentially flat sequential performance rather than accelerating expansion. By segment, consumables dominate at $8.892 billion, with seasonal at $1.084 billion, home products at $523 million, and apparel at $287 million — the growth engine is the low-margin consumables mix, which structurally caps operating leverage.
Profitability is solid and improving off a depressed base. Q1 FY2026 net income was $444.1 million on a 31.62% gross margin, up from $391.9 million and a 30.96% gross margin in the year-ago quarter, while net margin expanded to 4.12% from 3.76%. The prior four quarters show a clear recovery arc: net income of $191.2M (Q4 FY2024), $282.7M (Q3 FY2025), $426.3M (Q4 FY2025), and $444.1M (Q1 FY2026), with gross margin climbing from 29.40% to 31.62% over that span. Operating margin of 5.16% and a 3.54% net margin remain thin for retail but are consistent with the discount-store model, and the improvement trajectory — aided by shrink control, private-label mix, and lower freight — is the core of the bull case.
Balance-sheet leverage is the key risk. Debt-to-equity stands at 1.85x with a total-debt-to-capitalization ratio of 64.1%, and the current ratio of 1.13 is adequate but not comfortable; a quick ratio of 0.25 underscores heavy reliance on inventory. Free cash flow is robust, however: TTM FCF of $2.892 billion against a $31.6 billion market cap implies a roughly 9.2% FCF yield, and Q1 FY2026 operating cash flow of $716.2 million comfortably covered $351.6 million of capex. ROE of 17.77% and ROA of 4.89% are healthy for the sector, and the 1.65% dividend yield with a 34.4% payout ratio is well covered by cash generation, meaning growth is funded internally rather than through external financing.
Quarterly Revenue
$11.3B
2026-07
Revenue YoY Growth
+5.2%
YoY Comparison
Gross Margin
32.6%
Latest Quarter
Free Cash Flow
$2.7B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is DG Overvalued?
Because Dollar General is solidly profitable — Q1 FY2026 net income of $444.1 million and positive TTM earnings — the PE ratio is the appropriate primary metric. The stock trades at a trailing PE of 20.88x versus a forward PE of 15.08x, a roughly 28% compression that implies the market expects meaningful EPS growth ahead, consistent with the consensus estimate of $10.48 for the coming year. The forward earnings yield of about 6.6% is attractive relative to the 10-year Treasury and reflects a market that is pricing recovery but not euphoria.
On peer and sector comparison, DG's 0.74x price-to-sales and 0.94x EV-to-sales are low in absolute terms, and its 14.24x EV/EBITDA sits below the broader consumer-defensive retail average, suggesting a discount rather than a premium. The 3.71x price-to-book is elevated versus the stock's own history but reflects a heavily levered equity base rather than an operational premium. The PEG ratio of 0.61 is the standout — below 1.0 typically signals undervaluation relative to expected growth — and the 1.65% dividend yield, while modest, adds a defensive income component that many discount-retail peers lack.
Historically, DG's valuation has compressed dramatically: the PE ratio was 27.8x in Q3 FY2022 and 23.7x in Q3 FY2023, versus 20.9x today, while price-to-sales has fallen from 6.18x in Q3 FY2022 to 0.74x currently — a roughly 88% de-rating. The stock is therefore near the bottom of its own multi-year valuation band, which can signal either a genuine value opportunity or persistent fundamental deterioration; given the margin recovery and positive FCF, the evidence leans toward the former, but the market is clearly demanding proof of durable growth before re-rating the multiple.
PE
20.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 13x~28x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on leverage and thin margins. Debt-to-equity of 1.85x and a 64.1% total-debt-to-capitalization ratio mean interest expense of $47.2 million per quarter consumes a meaningful share of operating income, and the 1.13 current ratio with a 0.25 quick ratio leaves little liquidity cushion. Revenue concentration in consumables (82% of sales) structurally caps operating leverage, and the 5.16% operating margin means a modest 100-basis-point gross margin reversal — from shrink, freight, or promotional pressure — could erase a large portion of net income. The company's growth model depends on new store openings and comps, so any slowdown in unit growth or traffic would compound margin pressure.
Market and competitive risks are elevated by the stock's premium relative to its own history and the competitive intensity of discount retail. While DG trades at a discount to the broader consumer-defensive retail average on EV/EBITDA (14.24x), its 3.71x price-to-book is elevated versus its own history, reflecting a levered equity base rather than an operational premium. Walmart and Dollar Tree are aggressively competing on price and assortment, and Dollar Tree's raised 2026 outlook and tariff-refund reinvestment could pressure DG's traffic. With a beta of just 0.235, DG is less sensitive to macro swings, but that also means it lacks upside torque if the market rallies; sector rotation away from defensives could leave it further behind.
Worst-case scenario: a consumer slowdown combined with competitive share loss leads to flat or negative comps, gross margin retreats toward the 29.4% level seen in Q4 FY2024, and analysts cut EPS estimates below $10.00. In that scenario, the stock could retest its 52-week low of $95.11 (roughly 24% below the current $124.84) or even the analyst low target of $90 (28% below). Given the -34.88% max drawdown, an investor could lose 24–28% from current levels in an adverse scenario, with the $90–$95 zone representing the realistic downside floor based on historical support and analyst bear-case targets.
FAQ
The most severe risk is revenue deceleration: Q1 FY2026 growth of 3.36% is already slowing, and management has guided for slower growth ahead. Second, leverage at 1.85x debt-to-equity and a 0.25 quick ratio leaves little financial cushion if consumer demand weakens. Third, competitive pressure from Walmart and Dollar Tree — the latter having raised its 2026 outlook — could erode DG's rural market share. Fourth, margin sustainability is uncertain; the 31.62% gross margin could retreat if shrink, freight, or promotional costs rise. Ranked by severity: revenue deceleration, margin reversal, competitive share loss, and leverage constraints.
The 12-month forecast has three scenarios: a base case (50% probability) targeting $130–$145, assuming 3–4% revenue growth and stable 31–31.5% gross margin; a bull case (25%) targeting $158–$176, driven by comps above 4% and multiple re-rating; and a bear case (25%) targeting $90–$100, if comps fall below 2% and margins retreat. The base case is most likely, anchored by the analyst average target of $140.76 and consensus EPS of $10.48. The key assumption is that margin gains persist without a consumer slowdown.
DG appears modestly undervalued relative to its own history and peers. The trailing PE of 20.88x and forward PE of 15.08x are well below the 27.8x seen in Q3 FY2022, and the 0.74x price-to-sales is an 88% de-rating from 6.18x in Q3 FY2022. The PEG of 0.61 is below 1.0, typically signaling undervaluation, and the 14.24x EV/EBITDA is below the consumer-defensive retail average. The market is pricing in low growth and margin uncertainty, so any positive surprise on comps or margins could drive multiple expansion toward the $140–$176 range.
DG offers a balanced risk/reward at $124.84, with 12.8% upside to the analyst average target of $140.76 and 24–28% downside to the bear-case range of $90–$95. The stock trades at 15.08x forward PE with a 0.61 PEG, suggesting the market is pricing in stagnation, while the 9.2% FCF yield and 1.65% dividend provide a margin of safety. However, revenue growth of just 3.36% and a -15.09 six-month relative-strength gap versus SPY mean there is no clear near-term catalyst. It is a good buy for value-oriented, patient investors comfortable with a low-beta defensive holding, but less suitable for those seeking growth or momentum.
DG is better suited for long-term holding (minimum 12–18 months) given its low beta of 0.235, defensive consumer-defensive sector, and 1.65% dividend yield with a conservative 34.4% payout ratio. The stock's -34.88% max drawdown and choppy recovery mean short-term trading carries significant timing risk, and the lack of near-term catalysts makes quick gains unlikely. Earnings visibility is moderate, with tightly clustered analyst EPS estimates ($10.36–$10.59), but the wide target range ($90–$176) reflects uncertainty. A patient investor collecting the dividend while waiting for comps to inflect is the most appropriate strategy.