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Dollar Store Report Card: DG, DLTR, FDO

DLTR still rules supreme among dollar stores, but the sector as a whole is weak

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Dollar General (DG)

Dollar General DG stock chart
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Dollar General (DG) CEO Richard Dreiling might have tipped investors off to difficult times ahead for DG. In March of this year, he sold $19 million worth of his company’s shares at $57.92 on the open market.

DG stock has been steadily declining from the beginning of 2014, from a peak of $62.93 to a closing price of $53.50 last Thursday. While Sterne Agee was boosting its rating on DLTR, it was cutting its rating on DG from “buy” to “neutral,” and lowering its price target from $63 to $58. Deutsche Bank also cut its rating on DG from “buy” to “hold.”

Dollar General isn’t pricey, trading just under 17 times earnings, but ROE is just south of 20%.

As you can see from the accompanying chart, DG has a very weak technical outlook at the moment, having gapped down through support on heavy volume. The 50 day moving average has crossed below the 200 day moving average. Several technical indicators, such as RSI, MACD, and Stochastic are pointing lower, suggesting there is more downside to come. The next support level is not until the $50 level.

DG reports earnings before the bell tomorrow, and recent activity suggests that their earnings could fall short of expectations.

Grade: C-

As a note: I wouldn’t call any of these stocks a rip-roaring buy. However, DLTR does appear to be the superior member of the dollar store group, with the best earnings, relative strength and ROE of the three.

As of this writing, Ethan Roberts did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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