Dollar Tree Inc Stock Analysis

Dollar Tree Inc Stock Analysis - Stocks are difficult to predict. However, isn’t what make them interesting to analyze? Dollar Tree Inc (DLTR) which was formerly known as Only $1 offers its customers items for $1 or less. This is a discount variety store where one can find various items of daily use and a lot more. It operates across entire America and Canada with a nationwide logistic network to back its operation.

You can look for items including toys, food and snacks, party, health and beauty, housewares, glassware, dinnerware, seasonal décor, household cleaning supplies, candy, gifts, stationery, teaching supplies, electronics, book, pet supplies etc.

Talking about the company’s stock price, one should look out for value proposition, past performances and the growth plan of the company coupled with many other ratios. This would give a lucid explanation of what the future of the stock entails.

Dollar Tree Inc – Industry Peers Comparison

1.png

Before marching onward, let’s see what the competitors are up to. Although, the Price to Sales Ratio is a little bit higher than industry peers as per the above data, it’s still below one which is a good indication.

The company’s price to book ratio is 2.7, a price to earnings ratio is 12.0, a 5-Yr Rev CAGR% is 24.6, Positive Med Oper Margin% is 8.6 and Debt to Equity Ratio is 0.7. Comparing these values with industry peers, one can observe that Dollar Tree has lower valuation ratios than industry average. Moreover, it has very high revenues growth compared to competition, good operating margin and similar Debt proportion to its peers.

Hence, it’s an opportunity to embark on. By capturing growth and capital gains investing, it is evident that it’s a potential undervalue company.

Also Read - 

Profitability

Dollar Tree Inc (DLTR) have Gross Margins greater than 30%, Operating Margins Below 10% and Net Margins Below 10% but higher than 6%. Moreover, this company have a Decreasing Tax Rate %, Decreasing Asset Turnover Average, Increasing Financial Leverage (Average), increasing Return on Equity and Return on Invested Capital. This company

2.png

shows a tendency toward increasing profitability and increasing margins so it can be an opportunity to invest in.

Growth

As you can see in the data below, Dollar Tree Inc has remarkable Revenues, Operating Income, Net Income and Earnings per Share Growth Rates. Hence, the signals are talking in favor of the company. Investors can consider buying the stock as per the growth and value investing approach.

3.png

Cash-Flows

Here is another reason for considering this stock for investors seeking growth and value. The company’s tendency toward growth for Operating Cash-Flows and Free Cash-Flows reveals that this enterprise is generating value for shareholders and growing Capital Expenditures % of Sales (the company is investing for increasing production).

4.png

Liquidity/Financial Health

Dollar Tree Inc has increasing Current Ratio close to 2, decreasing Quick Ratio, decreasing Financial Leverage Ratio, and decreasing Debt to Equity Ratio.

A closer look indicates that the company has good amount of current assets to cover short term liabilities. Hence, it is on the right track to meet short term obligations. However, the problem is with the Quick Ratio which shows a decreasing amount of cash, receivables and short term investments relative to current debt. This signals that the probability of company’s financial risks is higher.

But, the company also has a tendency to maintain Financial Leverage and Decreasing Debt to Equity Ratio. This signals stability. The company is reducing the debt relative to the equity amount which minimizes the risk for investors to invest in this company.

5.png

Efficiency

This company tries to have a very little number of receivables. This helps in maintaining the Days in inventory and Payables Period. In turn, maintaining a tendency toward decreasing Receivable Turnover, Inventory Turnover, Fixed Asset Turnover and Asset Turnover. In short, it is improving its operating efficiency.

Also Read - 

1.png

Valuation

The company has better current valuation ratios than industry average, and lower current p/e ratio relative to forward p/e ratio. As per the Morningstar analysts, this enterprise would most probably increase stock price relative to earnings in the future. Hence, making itself a nice target for value investors.

2.png

Estimates

Morningstar Analysts made it clear through their analysis that this company will have a Five-Year Growth Forecast of 10.8%. 5 analysts recommend buying it, 2 recommend holding it and 1 say that it will outperform.

If you ask for my opinion, I recommend buying it, if you are oriented towards value and growth.

3.png
#investing