Earnings season is winding down, but next week offers up a few possibilities. One is Dollar General Corporation (NYSE: DG), which reports before the open Tuesday, June 8.
DG is the last of the discount retailers to report for the quarter, and based on the results from its discount brethren, it should do very well. So far, we’ve heard excellent results from such mainstays as Big Lots, Inc. (NYSE: BIG), Costco Wholesale Corporation (NASDAQ: COST) and Dollar Tree, Inc. (NASDAQ: DLTR), among others.
You’ve no doubt heard the reasons why. And it makes sense. The economy is far from out of the woods, and keeping or finding a job is anything but a sure thing. Consumers tend to pull in their horns when uncertainty reigns, looking for bargains rather than splurging. And discount retailers have been more than willing to offer up cheaper products.
DG is a relatively new to the public sector, having only started trading in November 2009. But the stock has been a top performer. Since its opening day close, the shares have appreciated 38%, while the Dow Jones Industrial Average and S&P 500 have essentially been flat. Currently, the stock is trading right around its all-time highs.
Because the stock is so new, it’s hard to get a solid sentiment read on the shares. Options volume and open interest are fairly low, so DG’s low put/call ratio isn’t a negative.
The stock does have decent analyst coverage with 14 analysts tracking the stock. Nine of those consider DG a “buy,” which is optimistic, but not overly so. The bottom line is that sentiment isn’t getting in the way of us liking this stock.
With strong results from the discount sector at its back, a record of solid outperformance on the charts in its brief history, and sentiment that isn’t a deal breaker, DG should do well after earnings next week.
Look at the in-the-money DG June 30 Calls, which have a tolerable bid/ask spread, to leverage the expected post-earnings upside.
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