Dollar General Corporation DG offers a sound investment opportunity and looks firm with regard to its financial growth model recently highlighted in a release. The company’s goal is to enhance shareholder returns – via earnings per share growth and dividend yield – by 11–17%.
Dollar General’s model includes an earnings per share annual growth target of 10–15% and net sales increase of 7–10%, including square footage growth of 6–8% and comparable-store sales growth of 2–4%. Operating profit is expected to improve 7–11%. Management anticipates cash from operations to be 7–8% of sales. It also estimates capital expenditures to be 2–3% of sales.
Dollar General plans to open about 900 new outlets and relocate or remodel around 875 stores during fiscal 2016. In the next fiscal year, the company intends to open about 1,000 new outlets and relocate or remodel approximately 900 stores.
We believe that the company’s commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives will drive sales and margins. Moreover, in order to drive traffic, Dollar General is focusing on both consumables and discretionary categories, and items ranging between $1 and $5.
It is apparent from the above that Dollar General deserves a place in your portfolio. This is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. Dollar General holds a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 14% with a VGM Score of “A”. Also, the stock has surged 16.7% so far this year.
Other Stocks to Consider
Investors interested in the retail space may consider other favorably ranked stocks such as Express Inc. EXPR, sporting a Zacks Rank #1 (Strong Buy), Target Corp. TGT and Burlington Stores, Inc. BURL, both carrying a Zacks Rank #2.
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