Dollar General
DG
$139.11
+5.29%
Dollar General is the largest small-box discount retailer in the United States, operating more than 20,000 stores across 48 states and generating over $42 billion in annual sales from a tightly curated assortment of roughly 11,000 SKUs spanning consumables (82% of sales), seasonal items (10%), home products (5%), and apparel (3%), with more than 20% of sales coming from private label. Its competitive identity is built on rural and low-income market density — stores deliberately placed in communities underserved by big-box retailers — which gives it a defensive, recession-resilient traffic base but also ties its fortunes to the financial health of the lower-income consumer. The current investor narrative centers on a margin-recovery and turnaround story: gross margin has climbed sequentially from roughly 29.4% in Q4 FY2024 to 32.6% in the most recent quarter, aided by tariff refunds that discount retailers are reportedly using to lower prices and defend traffic, while Q2 FY2026 delivered 5.2% revenue growth and a sharp EPS rebound. The debate is whether this improvement is durable operating leverage or a temporary, refund-assisted boost, with sell-side sentiment split between bulls citing the improving profit trajectory and skeptics worried about consumer softness and the stock's historically elevated debt load.…
DG
Dollar General
$139.11
Related headlines
Investment Opinion: Should I buy DG Today?
The synthesized recommendation is a Buy, anchored by the analyst consensus rating of 'buy' (mean 2.32) and an average target price of $142.83, which implies a 6.3% upside from the current $134.36. The core thesis is that Dollar General is undergoing a credible margin recovery and earnings turnaround, with gross margin expanding 320 basis points from the prior-year low and EPS growing 33.9% year-over-year in Q2 FY2026. The stock's defensive characteristics, including a low beta of 0.226 and a focus on consumables, provide downside protection in uncertain markets.
Supporting evidence includes the forward P/E of 16.2x, which is reasonable for a defensive retailer with a PEG ratio of 0.61, indicating undervaluation relative to growth. Revenue growth of 5.2% year-over-year is steady, and free cash flow TTM of $2.70 billion is robust, providing ample coverage for the 1.65% dividend yield. The operating margin has improved to 6.8% from 2.9% a year ago, showcasing operating leverage. The price-to-sales ratio of 0.74 is low, suggesting the market is not fully pricing in the recovery.
Key risks include the sustainability of margin gains, high debt-to-equity of 1.85, and potential consumer weakness. The rating would upgrade to a Strong Buy if gross margin holds above 32% for another quarter and revenue growth accelerates above 6%. It would downgrade to Hold if gross margin falls below 30% or if EPS growth stalls. Relative to its own history and peers, the stock appears undervalued given its low P/E and PEG, but the high debt and thin margins warrant caution. Overall, the stock is fairly valued to slightly undervalued, with upside contingent on execution.
Sign up to view all
DG 12-Month Price Forecast
The stock presents a balanced risk-reward profile, with the bull case supported by tangible margin improvement and earnings growth, while the bear case highlights sustainability concerns and financial leverage. The low beta and defensive nature make it a suitable holding for risk-averse investors, but the upside may be limited without further catalysts. I would upgrade to bullish if gross margin exceeds 33% and revenue growth accelerates above 6%, and downgrade to bearish if gross margin falls below 30% or consumer weakness intensifies.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Dollar General's 12-month outlook, with a consensus price target around $142.83 and implied upside of +2.7% versus the current price.
Average Target
$142.83
0 analysts
Implied Upside
+2.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$90 - $180
Analyst target range
Bulls vs Bears: DG Investment Factors
The bull case is currently stronger, supported by tangible margin expansion, a sharp earnings rebound, and a consensus buy rating with upside to analyst targets. However, the bear case raises valid concerns about the sustainability of margin gains, high debt, and thin net margins. The most critical tension is whether the margin recovery is structural or merely a temporary benefit from tariff refunds and cost cuts. If margins hold above 32% in the coming quarters, the stock could re-rate higher; if they falter, the downside could be significant given the already low net margin.
Bullish
- Margin recovery accelerating: Gross margin expanded from 29.4% in Q4 FY2024 to 32.6% in Q2 FY2026, a 320-basis-point improvement, while operating margin rose from 2.9% to 6.8% over the same period. This demonstrates meaningful operating leverage and cost discipline.
- Earnings rebound is substantial: Q2 FY2026 EPS of $2.49 represents a 33.9% increase from $1.86 in Q2 FY2025, and net income grew 33.8% to $550 million. The sharp rebound suggests the turnaround is gaining traction.
- Analyst consensus sees upside: With 29 analysts covering the stock, the average target price of $142.83 implies a 6.3% upside from the current $134.36, and the high target of $180 suggests 34% potential. The consensus recommendation is 'buy' with a mean rating of 2.32.
- Attractive valuation multiples: The forward P/E of 16.2x and PEG ratio of 0.61 indicate the stock is inexpensive relative to expected earnings growth. The price-to-sales ratio of 0.74 is also low for a defensive retailer with stable cash flows.
Bearish
- High debt burden: Debt-to-equity ratio of 1.85 is elevated for a retailer, and interest expense remains significant at $42.9 million in Q2 FY2026. This limits financial flexibility and increases sensitivity to rising rates.
- Thin net margins: Net margin is only 3.5%, leaving little room for error. Any compression in gross margin or increase in operating costs could quickly erode profitability.
- Tariff refunds may be temporary: Recent gross margin improvement has been partially aided by tariff refunds, which may not be recurring. The sustainability of the margin recovery is uncertain, as highlighted in recent news about discount retailers using refunds to lower prices.
- Consumer softness risk: Dollar General's core low-income customer base is sensitive to economic downturns and inflation. While defensive, prolonged consumer weakness could pressure sales and margins, as evidenced by the stock's 34.9% max drawdown.
DG Technical Analysis
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
+34.3%
Cumulative gain past year
| Period | DG Return | S&P 500 |
|---|---|---|
| 1m | +13.4% | -1.2% |
| 3m | +18.7% | +3.4% |
| 6m | +15.2% | +7.0% |
| 1y | +34.3% | +14.4% |
| ytd | +1.7% | +12.0% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
DG Fundamental Analysis
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
Open an Account, get $2 TSLA now!
Valuation Analysis: Is DG Overvalued?
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
Dollar General faces financial risks stemming from its high debt load, with a debt-to-equity ratio of 1.85 and interest expense of $42.9 million in Q2 FY2026. The company's net margin is only 3.5%, leaving little buffer for unexpected cost increases or sales declines. Additionally, the recent gross margin improvement to 32.6% may be partially attributed to tariff refunds, which are not guaranteed to persist. Revenue growth of 5.2% year-over-year is modest, and any deceleration could pressure profitability given the high fixed-cost structure.
Market and competitive risks include the potential for valuation compression if growth slows. The stock trades at a forward P/E of 16.2x, which is not demanding but could contract if earnings growth disappoints. The low beta of 0.226 suggests the stock is less sensitive to market swings, but it also means it may lag in a strong bull market. Competition from larger retailers like Walmart and Target, as well as dollar-store peers, is intense, and tariff refunds are benefiting all players, potentially eroding Dollar General's relative advantage. Recent news highlights that competitors are also using refunds to lower prices, which could pressure margins industry-wide.
The worst-case scenario would involve a consumer-led recession that disproportionately impacts Dollar General's low-income customer base, coupled with margin compression as tariff refunds fade and competition intensifies. In such a scenario, the stock could retest its 52-week low of $95.11, representing a 29.2% decline from the current price of $134.36. The analyst low target of $90 implies a 33% downside. Given the stock's max drawdown of 34.9% over the past period, a decline of 30-35% is plausible in a severe downturn.
FAQ
The key risks include financial risk from high debt-to-equity of 1.85 and interest expense of $42.9 million, which could strain profitability if rates rise. Operational risk stems from thin net margins of 3.5%, leaving little room for error. Competitive risk is intensifying as peers also benefit from tariff refunds and lower prices. Macro risk is tied to consumer weakness, as DG's low-income customer base is sensitive to economic downturns. The most severe risk is a margin reversal that could trigger a stock decline toward the 52-week low of $95.11.
The 12-month forecast has a base case (50% probability) of $135-150, aligned with the analyst average target of $142.83, assuming steady margin recovery and 5% revenue growth. The bull case (30% probability) targets $160-180, driven by sustainable margin expansion and EPS growth above 15%. The bear case (20% probability) targets $90-110, reflecting a consumer downturn and margin compression. The most likely scenario is the base case, with the key assumption that gross margin holds near 32% and revenue grows in the mid-single digits.
DG stock appears undervalued based on its forward P/E of 16.2x and PEG ratio of 0.61, which are below typical retail peers and suggest the market is not fully pricing in earnings growth. The price-to-sales ratio of 0.74 is also low for a defensive retailer with stable cash flows. However, the trailing P/E of 20.9x is higher due to depressed earnings, but the forward multiple indicates improvement. Compared to its own history, the stock has traded at higher multiples during growth phases. The market seems to expect modest growth, but if margin recovery continues, the stock could re-rate higher.
DG appears to be a good buy for value-oriented investors, given the analyst consensus buy rating and average target price of $142.83, which implies a 6.3% upside from the current $134.36. The stock trades at a forward P/E of 16.2x and a PEG of 0.61, suggesting it is undervalued relative to growth. The margin recovery and earnings rebound are encouraging, but the high debt-to-equity of 1.85 and thin net margin of 3.5% are concerns. The biggest downside risk is a retest of the 52-week low of $95.11, representing a 29% decline. Overall, it is a good buy for conservative investors with a medium-term horizon who can tolerate moderate volatility.
DG is more suitable for medium-to-long-term investment (at least 1-2 years) given its defensive characteristics, low beta of 0.226, and stable dividend yield of 1.65%. The turnaround story may take several quarters to fully play out, and short-term volatility could be high around earnings. The stock's low correlation with the market makes it a good portfolio diversifier for long-term holders. Short-term traders might find opportunities around earnings announcements, but the low beta limits rapid gains. A minimum holding period of one year is recommended to capture the margin recovery.