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Should You Buy Dollar General Stock Before Earnings?

Published 08/23/2017, 12:57 AM
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Dollar General (NYSE:DG) is a $21 billion company today. Investors that bought shares one year ago are sitting on a -16.59% total return. That's below the S&P 500's return of 13.51%.

Dollar General stock is underperforming the market. It's beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Dollar General reported a recent EPS growth rate of -0.97%. That's below the multiline retail industry average of 52.94%. That's not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the multiline retail industry is 30.8. And Dollar General's ratio comes in at 16.63. It's trading at a better value than many of its competitors.

Debt-to-Equity : The debt-to-equity ratio for Dollar General stock is 54.86%. That's below the multiline retail industry average of 167.07%. The company is less leveraged.

Free Cash Flow per Share Growth : Dollar General's FCF has been lower than that of its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins : The profit margin of Dollar General comes in at 4.98% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Dollar General's profit margin is below the multiline retail average of 7.83%. So that's a negative indicator for investors.

Return on Equity : Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Dollar General is 24.38%, and that's equal to its industry average ROE of 24.38%.

Dollar General stock passes two of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold With Caution.

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