Dollar General (DG:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Dollar General(DG:NYS)

Consumer Defensive:Discount Stores

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$205.02 (USD) 09/24/2020

Weighted Valuation
$203.25 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 0.9%

Valuation Models Multiples: $164.15 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $203.25 this stock is Fairly valued

Company Overview (DG:NYS USD)

Price 205.02
Range 202.58 – 206.29
52 week 136.10 – 208.34
Open 204.22
Vol / Avg. 1.41M/2.14M
Mkt cap 51.06B
P/E 22.28
Div/yield 1.28/0.01
EPS 6.64
Shares 249.03M
Beta 0.49

Company Description

A leading American discount retailer, Dollar General operates over 16,000 stores in 45 states, selling branded and private-label products across a wide variety of categories. In fiscal 2019, 78% of net sales came from consumables (including paper and cleaning products, packaged and perishable food, tobacco, and health and beauty items), 12% from seasonal merchandise (such as toys, greeting cards, decorations, and gardening supplies), 6% from home products (for example, kitchen supplies, small appliances, and cookware), and 4% from basic apparel. Stores average roughly 7,400 square feet, and about 75% of Dollar General locations are in towns of 20,000 or fewer people. The firm emphasizes value, with more than 80% of its items sold at $5 or less, mostly using an everyday-low-price strategy.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for DG:NYS

Using a discounted cash flow model we generated an intrinsic value of $265.50 (USD) for DG:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

DG:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $265.50 1% 5% 1% 5%
WACC (or Ke) 3.54 $376.21 $203.66
Terminal Growth Rate 0.00 $207.74 $368.83
Tax Rate 0.22 $284.54 $246.46
Cash Flow 3,914,700,000 $248.24 $282.76
Capital Expenditures -652,197,600 $262.79 $268.21
Long Term Debt 3,058,012,000 $266.11 $264.88

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $138.93 (USD) for DG:NYS. We also generated a valuation of $225.06 (USD) using other metrics and comparables.
The comparable companies were Dollar Tree (DLTR:NAS), Costco Wholesale (COST:NAS), Target (TGT:NYS) and Walmart (WMT:NYS).

Company DG:NYS End Date Value
Earnings/Share $9.20 (USD)
Book Value/Share $29.54 (USD)
Sales/Share $122.83 (USD)
Cash Flow/Share $15.77 (USD)
EBITDA/Share $11.02 (USD)
Price Based on Comps Adjustment Factor (%)
$250.73 (USD) -37.7
$172.74 (USD) -17.7
$105.80 (USD) 4.2
$154.47 (USD) -10.7
$166.11 (USD) -11.0
DG:NYS Ratios Used Average Values DLTR:NAS COST:NAS TGT:NYS WMT:NYS
22.28 PE Ratio 27.25 23.71 41.51 22.00 21.80
6.94 PB Ratio 5.85 3.08 9.12 6.05 5.14
1.67 PS Ratio 0.86 0.85 0.96 0.91 0.72
13.00 PCF Ratio 12.71 8.54 22.28 8.22 11.81
16.76 EV to EBITDA 15.07 14.62 22.65 11.35 11.66

Multiples

Using a multiples approach we generated a valuation of  $164.15 (USD) for DG:NYS

Company DG:NYS End Date Value
Earnings/Share $9.20 (USD)
Book Value/Share $29.54 (USD)
Sales/Share $122.83 (USD)
Cash Flow/Share $15.77 (USD)
EBITDA/Share $11.02 (USD)
Price Based on Comps Adjustment Factor
$177.82 (USD) 0
$130.65 (USD) 0
$143.39 (USD) 0
$239.58 (USD) 0
$129.29 (USD) 0
Ratios Ratio Average
PE Ratio 19.33
PB Ratio 4.42
PS Ratio 1.17
PCF Ratio 15.20
EV to EBITDA 11.73

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  DG:NYS for the last 10 years was  4.26

We ran the Adjusted Book Value for  DG:NYS and generated a book value of  $29.20 (USD)
By multiplying these we get an adjusted valuation of  $124.47 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for DG:NYS. The 4 analysts have a concensus valuation for DG:NYS for 2021 of $203.25 (USD).

DG:NYS Dollar General

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 3 0 3.7143 Outperform 2020-9-23

Current Price: 205.02 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 9.43 9.41 10.13
# EPS Analysts 5 5 3
Mean Revenue 32,969.10 34,125.90 35,001.80
# Revenue Analysts 4 4 2
Mean Target Price 203.25
Mean Cash Flow 11.36 12.01 12.99
Mean EBITDA 3,886.40 3,696.20 3,914.70
Mean Net Income 2,464.50 2,263.60 2,377.50
Mean Debt Outstanding 1,025.30 1,020.90 2,017.40
Mean Tax Rate 22.10 22.50 22.50
Mean Growth Rate 13.72
Mean Capital Expenditure 998.90 922.30 887.30

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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