DG. Ok, I'll follow you with a buy of Dollar General.
For me:
p/e: low (value)
p/sales: relatively high (negative)
p/stated book: relatively high (negative)
multi-year revenue growth: positive
last quarter: positive (imo)
Roe/pe: high roe; relatively low stock price. Greenblatt model
Negative view (Barron's 3/23):
(Credit Suisse)Analyst Edward Kelly downgraded the discount retailer to underperform and cut his price target from $68 to $62 a share, arguing that the company’s goal of opening 1,000 stores a year and growing earnings by 10% seems “unreasonable.” "DG’s long-term growth algorithm looks unachievable, as increasing competition and rising cost pressures should weigh on earnings for some time. While Q4 beat low expectations, the update highlighted underlying concerns related to sales momentum, margin sustainability, and the logic behind ramping openings to 1,000 stores per year. We believe DG will ultimately be forced to reset expectations and disappoint a street consensus that has assumed a reacceleration to 10% annual growth after a flat 2017." At a recent $69.23, Dollar General’s stock price climbed 2.1% in recent market action. The stock is down almost 20% over the past 12 months."
In my view too, customers go to the store to buy inexpensive stuff which they wouldn't order on-line. Company has 13,000 stores, so convenient location would be a positive. Apparently company has entered the grocery business, and that's not going as well as expected? I'll buy here, and bet the overall business is still remains pretty good, and stock price will be higher (revert to median p/e) within a couple of years.
So many good or good/excellent companies trading at what seem to me to be high prices (evidenced by being near 12-mo or multiyear highs), that pickings are slim. Here's one quality company though, that while it may have some problems (or may not), it's at least trading near lows (stock price and p/e). And that may offer a value opportunity. Jmo, although I've been wrong many, many times. |
