For the past year, Dollar General Corp. (DG) and Dollar Tree, Inc. (DLTR) fought contentiously for the acquisition of competitor Family Dollar Stores, Inc. Family Dollar initially agreed to merge with Dollar Tree last summer for $8.5 billion. But, after the company’s initial offer, Dollar General entered the ring and bid $9.1 billion for Family Dollar. Ultimately, the deal went in favor of Dollar Tree’s bid.
Now that the deal closed earlier this month and the dust has settled, it looks like Dollar General still remains the industry leader. While both discount chains have about 12,000 stores and similar quarterly sales, Dollar General is by far the better stock pick. It has been on an uptrend for the past year with share prices increasing 46.4% in the last year.
More recently, Dollar General had a stellar first-quarter earnings season. DG reported Q1 EPS of $0.84, which beat analysts’ estimates for $0.81 per share and is up nearly 17% from $0.72 per share last year. Analysts expect Dollar General to grow into the second quarter, estimating $0.94 earnings per share on revenues of $5.1 billion.
DG is also highly rated in my Turner Analytics database system. The company has a good Demand Fundamental Score of 58 out of 100, led by strong multi-year earnings, multi-year revenue growth and return on equity. DG has an expected move of 5.18%, or $4.17, while its institutional ownership is very strong, at 98%.
Meanwhile, Dollar General’s Demand Technical Score is excellent, earning 100 out of 100. The stock is also outperforming its Industry (Discount, Variety Stores) and Sector (Consumer Discretionary). Share prices have been trending higher for well over eight months and look to be on track to continue that move in the near term.
Given the current market environment, now is an opportune time to buy DG shares at a great price. You should enter the stock at $80.20 or better and set your stop at $71.36.
Mike Turner and his team of software engineers developed Turner Analytics, a sophisticated software market and trade-timing system that provides unbiased, quantifiable recommendations on thousands of equities and rates, ranks and scores these equities from best to worst in an easy-to-use on-line tool for individual investors. He is also the editor of Signal Investor.
