Dollar General
DG
$132.30
+1.70%
Dollar General Corp. operates the largest network of small-box discount stores in the United States, running more than 20,000 locations across 48 states that generated over $42 billion in fiscal 2025 sales, with consumables (roughly 82% of sales), seasonal, home, and apparel categories rounding out an assortment of about 11,000 SKUs, over 20% of which is private label. Its competitive identity is built on rural and low-income market density — stores deliberately placed where big-box retailers do not go — making it a defensive, traffic-driven consumables retailer rather than a discretionary destination. The current investor narrative centers on a credible turnaround: consistent quarterly earnings beats, raised guidance, and positive same-store sales have revived the bull case, reinforced by tariff refunds that management is redeploying into price to defend its value positioning against Walmart, Target, and Dollar Tree. Debate now hinges on whether margin recovery and traffic gains are durable enough to justify the re-rating the stock has already begun to enjoy, with sell-side sentiment split between upgrade-driven bulls and analysts who remain cautious on future growth.…
DG
Dollar General
$132.30
Related headlines
Investment Opinion: Should I buy DG Today?
Rating: Hold with a bullish bias. The core thesis is that Dollar General is a credible turnaround story with improving margins and consistent earnings beats, but the stock has already re-rated significantly from its lows and now trades at a moderate premium to peers, limiting near-term upside. The analyst consensus 'buy' rating (mean 2.32) and average target of $142.83 imply only 7.6% upside, suggesting the easy money has been made.
Supporting evidence: (1) Gross margin expanded ~270 bps from Q3 FY2025 to Q2 FY2026, reaching 32.60%, with operating margin at 6.81% versus 5.55% a year ago. (2) Revenue grew 5.24% year-over-year in Q2 to $11.29 billion, extending a consistent 5-6% cadence. (3) Forward PE of 15.97x represents a 23.5% discount to trailing, and the PEG ratio of 0.61 is attractive. (4) Free cash flow of $2.70 billion TTM comfortably covers the 1.65% dividend (34.35% payout) and funds capex. However, the 3.54% net margin and 1.85x debt-to-equity remain concerns.
Risks and conditions: The biggest risks are margin reversal (if gross margin falls below 30%), competitive price pressure from Walmart and Dollar Tree, and a stall in traffic growth. This Hold would upgrade to Buy if the stock pulls back to the $115-$120 range (closer to the 15.97x forward PE on conservative estimates) or if Q3 results show gross margin holding above 32% with positive comps. It would downgrade to Sell if gross margin drops below 30% or if same-store sales turn negative. Valuation verdict: fairly valued relative to history (20.9x PE sits in the middle-upper portion of the 12.7x-27x range) and at a slight premium to peers, but justified by the recovery trajectory.
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DG 12-Month Price Forecast
The forward view is balanced: the margin recovery and earnings beats are real, but the stock has already priced in much of the turnaround, leaving only 7.6% upside to the average analyst target. The low beta (0.226) and defensive characteristics make it a relatively safe holding, but the thin net margin (3.54%) and elevated leverage (D/E 1.85x) limit the margin of safety. I would upgrade to bullish if Q3 results show gross margin above 32.5% and comps accelerating, or if the stock pulls back to the $115-$120 range. I would downgrade to bearish if gross margin falls below 30% or if same-store sales turn negative, signaling the turnaround has stalled.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Dollar General's 12-month outlook, with a consensus price target around $142.90 and implied upside of +8.0% versus the current price.
Average Target
$142.90
0 analysts
Implied Upside
+8.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$90 - $180
Analyst target range
Coverage is broad, with 29 analysts and a consensus recommendation of "buy" (mean rating 2.32 on a scale where lower is more bullish), and an average target price of $142.83 implying roughly 7.6% upside from the current $132.69 — a modest but positive signal that leans cautiously bullish rather than aggressively so. The distribution of recent actions is mixed: HSBC upgraded to Buy from Hold on September 24, 2026, while Barclays, Argus, and Guggenheim maintained Buy/Overweight ratings, but BNP Paribas, Citigroup, BMO, Morgan Stanley, Piper Sandler, and Telsey all stayed at Neutral/Market Perform/Equal Weight — a split that reflects conviction in the turnaround among bulls offset by valuation and growth-durability concerns among the hold camp. The target range is extremely wide, from $90 to $180, a 100% spread that signals high uncertainty: the $180 high assumes full margin recovery, sustained comps, and multiple expansion toward historical norms, while the $90 low discounts margin compression, competitive pressure from Walmart and Dollar Tree, and a stalled turnaround. Consensus revenue estimates of $51.84 billion (range $51.55B-$52.29B) and EPS estimates of $10.48 (range $10.40-$10.59) are tightly clustered, indicating analysts agree on near-term fundamentals but diverge sharply on the appropriate multiple — the wide price-target spread, combined with the stock's low 0.226 beta and 2.57 short ratio, suggests positioning is light and price discovery remains inefficient, leaving room for sharp moves on the next earnings print.
Bulls vs Bears: DG Investment Factors
The bull case currently has stronger evidence: margin recovery is tangible (gross margin up ~270 bps from Q3 FY2025 to Q2 FY2026), earnings are beating consistently (Q2 EPS $2.49 vs. $1.87), and the stock trades at a reasonable 15.97x forward earnings with a 0.61 PEG. However, the bear case is not without merit—thin net margins (3.54%), elevated leverage (D/E 1.85x), and a wide analyst target range ($90-$180) highlight fragility. The single most important tension is whether the margin recovery is durable: if gross margins hold above 32% and traffic stabilizes, the re-rating can continue toward the $158 high; if margin gains reverse due to competitive price investment or cost pressures, the stock could retest the $100-$105 support zone. Near-term momentum (+10% in one month) and relative strength (+11 points vs. SPY) favor the bulls, but the recent 4.62% pullback from resistance warrants caution.
Bullish
- Margin recovery is real and accelerating: Gross margin expanded from 29.90% in Q3 FY2025 to 32.60% in Q2 FY2026, a roughly 270-basis-point improvement driven by lower shrink, better markups, and freight/tariff relief. Operating margin nearly doubled from 3.18% in Q3 FY2024 to 6.81% in Q2 FY2026, showing the turnaround is translating into bottom-line leverage.
- Consistent earnings beats and raised guidance: Management has delivered consecutive quarterly beats, with Q2 FY2026 EPS of $2.49 versus $1.87 a year ago (a 33% increase) and net income up 34% to $550.3 million. The Zacks Bull of the Day note (Oct 23, 2026) explicitly cites raised guidance and positive same-store sales as evidence of a successful turnaround.
- Attractive valuation with PEG below 1: The stock trades at 20.88x trailing earnings but only 15.97x forward, a 23.5% compression that implies strong expected EPS growth. The PEG ratio of 0.61 and price-to-sales of 0.74x suggest the market is not overpaying for the recovery, especially with a 17.8% ROE and $2.70 billion in trailing free cash flow.
- Defensive, low-beta profile with rural moat: With a beta of just 0.226, DG is roughly 77% less volatile than the market, making it a defensive holding in uncertain macro environments. Its 20,000+ stores in rural and low-income areas underserved by big-box retailers create a structural traffic moat, and 82% of sales come from consumables, providing revenue stability.
Bearish
- Thin margins leave little cushion: Despite improvement, the TTM net margin is only 3.54% and operating margin 5.16%, which is razor-thin for retail and vulnerable to cost shocks. Any reversal in shrink, wage inflation, or promotional intensity could quickly erase the margin gains that underpin the bull case.
- Elevated leverage constrains flexibility: Debt-to-equity stands at 1.85x with a debt ratio near 0.51, and interest expense of $42.9 million in Q2 alone consumes a meaningful share of operating income. The heavy store-growth capex program ($406.8 million in Q2) means external financing remains part of the capital structure, limiting financial flexibility if growth slows.
- Wide analyst target dispersion signals uncertainty: The target range spans $90 to $180—a 100% spread—reflecting deep disagreement on the appropriate multiple. Six major firms (BNP Paribas, Citigroup, BMO, Morgan Stanley, Piper Sandler, Telsey) remain at Neutral/Equal Weight, citing valuation and growth-durability concerns, which could cap upside.
- YTD underperformance and recent sharp pullback: The stock is down 3.02% year-to-date versus the S&P 500's +11.45%, a relative strength of -14.47 points, showing the recovery has lagged the market. The most recent session saw a 4.62% one-day drop from $139.11 to $132.69 on elevated volume, suggesting profit-taking at resistance near the 52-week high.
DG Technical Analysis
Dollar General is in a sustained recovery uptrend, with the stock up 28.84% over the past year and currently trading at $132.69, which places it at roughly 59% of its 52-week range of $95.11 to $158.23 — above the midpoint but still about 16% below the high, consistent with a stock that has repaired significant damage without yet reclaiming its prior peak. The 1-year gain of 28.84% compares favorably with the S&P 500's 13.13%, producing relative strength of 15.71 percentage points, though the year-to-date decline of 3.02% versus the SPY's +11.45% (relative strength of -14.47) shows the stock spent the first part of the year in a deep drawdown before the recovery took hold. Short-term momentum is clearly accelerating: the stock is up 10.02% over the past month and 13.19% over three months, both sharply ahead of the SPY's -1.02% and +2.85%, yielding relative strength of +11.04 and +10.34 points, a decisive reversal from the weak YTD trend. The most recent session, however, saw a 4.62% pullback from $139.11 to $132.69 on volume of about 1.93 million shares, a sharp one-day reversal after the stock had pushed to $139.11 — a level just below the 52-week high — suggesting profit-taking at resistance rather than a trend break. Key resistance sits at the $139-158 zone, with a breakout above $158.23 signaling a full recovery and new highs, while support is anchored near the $95.11 52-week low and the $100-105 area that marked the May 2026 capitulation; a beta of just 0.226 means the stock is roughly 77% less volatile than the market, which materially reduces position-sizing risk but also means the 34.88% max drawdown was driven by idiosyncratic company-specific factors rather than market beta.
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
+32.9%
Cumulative gain past year
| Period | DG Return | S&P 500 |
|---|---|---|
| 1m | +10.6% | -0.9% |
| 3m | +4.1% | +1.2% |
| 6m | +15.6% | +4.9% |
| 1y | +32.9% | +11.2% |
| ytd | -3.3% | +10.8% |
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DG Fundamental Analysis
Revenue is growing at a steady mid-single-digit pace: Q2 FY2026 revenue of $11.29 billion rose 5.24% year over year from $10.73 billion, extending a consistent cadence of roughly 5-6% growth across the trailing four quarters ($10.64B in Q3 FY2025, $10.91B in Q4, $10.79B in Q1 FY2026). Segment data shows consumables dominating at $9.26 billion, with seasonal at $1.19 billion, home products at $537 million, and apparel at $303 million — the mix is heavily weighted toward low-margin, traffic-driving categories, meaning growth is volume- and store-count-led rather than mix-led, and the investment case depends on traffic stabilization and basket size rather than category expansion. Profitability is improving meaningfully: Q2 net income of $550.3 million produced a 4.87% net margin, up from 3.84% in the year-ago quarter, while gross margin expanded to 32.60% from 31.34% a year earlier and operating margin reached 6.81% versus 5.55%. The multi-quarter margin trajectory is decisively upward — gross margin climbed from 29.90% in Q3 FY2025 to 30.45% in Q4, 31.62% in Q1 FY2026, and 32.60% in Q2 — a roughly 270-basis-point expansion that reflects lower shrink, better markups, and freight/tariff relief, though the 3.54% TTM net margin and 5.16% operating margin remain thin for retail and leave little cushion for cost shocks. The balance sheet carries real leverage — debt-to-equity of 1.85x and a debt ratio near 0.51 — but cash generation is robust, with TTM free cash flow of $2.70 billion, Q2 operating cash flow of $780.5 million against capex of $406.8 million, and a current ratio of 1.13; ROE of 17.77% and ROA of 4.89% are healthy for a low-margin retailer, and the 1.65% dividend yield with a 34.35% payout ratio is comfortably covered, though the heavy store-growth capex program means external financing remains part of the capital structure.
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 — Q2 net income of $550.3 million and positive TTM earnings — the PE ratio is the appropriate primary metric, and the stock trades at 20.88x trailing earnings versus 15.97x forward, a 23.5% compression that implies the market expects meaningful EPS growth (consensus FY estimates of about $10.48 versus the current $0.048 quarterly GAAP figure reflect the depressed base and expected normalization). On a price-to-sales basis the stock is cheap at 0.74x, and EV/EBITDA of 14.24x and EV/Sales of 1.03x frame a retailer priced for modest growth rather than premium quality. Peer comparison is constrained by the absence of a supplied industry-average multiple, but contextually a 20.9x trailing PE for a 3.5%-net-margin discount retailer with 5% revenue growth is a moderate premium to the low-teens multiples typically assigned to dollar-store peers, arguably justified by the margin-recovery trajectory and 17.8% ROE but vulnerable if the turnaround stalls. Historically, the stock's PE has ranged from roughly 12.7x (Q2 FY2026) to over 27x (Q3 FY2022), and the current 20.9x sits in the middle-to-upper portion of that band — above the 12.7x-14.5x trough multiples of the past year but well below the 23x-28x levels of 2022-2023, suggesting the market is pricing in a partial, not full, normalization of earnings power.
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 DG's thin profitability and heavy leverage. The TTM net margin of 3.54% and operating margin of 5.16% leave minimal buffer against cost shocks, while debt-to-equity of 1.85x and a debt ratio near 0.51 mean interest expense ($42.9 million in Q2) consumes a meaningful portion of operating income. The company's growth model relies on continued store expansion—capex was $406.8 million in Q2 alone—which requires external financing and exposes the balance sheet if returns on new stores disappoint. Additionally, revenue concentration in consumables (82% of sales) means the business is highly sensitive to traffic trends and basket size, with little diversification into higher-margin categories.
Market and competitive risks include valuation compression if the turnaround stalls. At 20.88x trailing earnings, DG trades at a moderate premium to the low-teens multiples typical of dollar-store peers, justified only by the margin-recovery narrative; any slowdown could trigger multiple contraction toward the 12.7x-14.5x trough seen in the past year. Competitive pressure is intensifying as Walmart, Target, and Dollar Tree also receive tariff refunds and reinvest in price, potentially eroding DG's value positioning. The stock's low beta of 0.226 reduces market-correlation risk but means idiosyncratic factors—such as a weak earnings print or a competitor's price war—can drive outsized moves, as evidenced by the 34.88% max drawdown.
Worst-case scenario: a combination of margin reversal (gross margin falling back below 30%), traffic deterioration, and competitive price investment could push the stock toward its 52-week low of $95.11 or the analyst bear-case target of $90. From the current $132.69, that represents a decline of approximately 28% to $95.11 or 32% to $90. Such a scenario would likely be triggered by a disappointing Q3 earnings report showing comps turning negative and shrink costs rising again, prompting downgrades and multiple compression toward the low end of the historical range.
FAQ
The most severe risk is margin reversal: gross margin could fall back below 30% if shrink rises or competitive price investment intensifies, erasing the ~270 bps of improvement and pressuring earnings. Second is competitive pressure from Walmart, Target, and Dollar Tree, all of which are reinvesting tariff refunds into price and could erode DG's traffic. Third is financial leverage: debt-to-equity of 1.85x and interest expense of $42.9 million per quarter limit flexibility. Fourth is valuation compression: at 20.88x trailing earnings, any slowdown could trigger multiple contraction toward the 12.7x-14.5x trough, implying a 30%+ downside to the $95-$105 range.
The 12-month forecast has three scenarios: bull case (30% probability) targeting $158-$180 if margin recovery accelerates and multiple expands; base case (50% probability) targeting $135-$150, aligned with the average analyst target of $142.83 and steady 5-6% revenue growth; and bear case (20% probability) targeting $90-$105 if margins reverse and traffic deteriorates. The base case is most likely, assuming gross margin stabilizes around 32-33% and no major competitive disruption. The key assumption is that the turnaround remains on track, with Q3 earnings confirming positive comps and margin resilience.
DG appears fairly valued to slightly undervalued relative to its own history and peers. The trailing PE of 20.88x sits in the middle-upper portion of its 12.7x-27x historical range, while the forward PE of 15.97x represents a 23.5% discount to trailing, implying expected EPS growth. The PEG ratio of 0.61 and price-to-sales of 0.74x suggest the market is not overpaying for the recovery. However, the stock trades at a moderate premium to the low-teens multiples typical of dollar-store peers, which is justified only if margin recovery continues. The market appears to be pricing in a partial, not full, normalization of earnings power.
DG is a reasonable buy for value-oriented investors with a medium-term horizon, but the risk/reward is only moderately attractive at current levels. The stock trades at 15.97x forward earnings with a PEG of 0.61, and the average analyst target of $142.83 implies 7.6% upside. The biggest downside risk is a margin reversal that could push the stock toward $95-$105 (a 21-28% decline). For investors comfortable with a defensive, low-beta holding and willing to wait for the turnaround to fully play out, DG offers a favorable risk/reward; for those seeking high growth, it is less compelling.
DG is better suited for medium-to-long-term investment (minimum 12-18 months) rather than short-term trading. Its low beta of 0.226 means it lacks the volatility that short-term traders seek, and the turnaround narrative requires time to fully play out. The 1.65% dividend yield and 34.35% payout ratio provide modest income, while the 5-6% revenue growth and margin recovery offer total return potential. Short-term traders might find opportunities around earnings, but the wide analyst target range ($90-$180) and recent 4.62% pullback suggest choppy price action. A suggested minimum holding period of 12 months allows for the next few earnings cycles to validate the recovery.