Dollar Tree (DLTR): Assessing Valuation as Shares Slide 13% in the Past Month

Dollar Tree (DLTR) stock has been under pressure lately, dropping 13% over the past month. Investors are sifting through recent developments and broader retail trends to judge where the discount retailer is headed next.

See our latest analysis for Dollar Tree.

Dollar Tree’s share price has struggled lately, continuing a downtrend that began earlier this year as retail sentiment has cooled. While its stock fell 13% in the last month, the one-year total shareholder return is still positive. This suggests that underlying business growth or improved efficiency may be helping to cushion recent setbacks, though forward momentum remains uncertain.

If you’re interested in spotting fresh opportunities beyond the discount retail space, consider broadening your search and discover fast growing stocks with high insider ownership

With Dollar Tree trading well below analyst price targets even as it delivers steady growth, the question remains: Is the market undervaluing the company, or is it factoring in all future gains already?

Most Popular Narrative: 21.9% Undervalued

Dollar Tree's most widely followed narrative places its fair value well above the recent close. This substantial gap in valuation is based on expectations for robust growth and successful margin improvements, raising the question of whether the market is overlooking key future earnings catalysts.

The retailer's rapid rollout of multi-price point assortments beyond the historic $1.25 price cap has expanded average basket size and created margin uplift. At the same time, it has retained core value appeal, providing a structural path to gross margin improvement and potential EPS growth.

Read the complete narrative.

Want to know which assumptions fuel this bold fair value? Hint: It all comes down to a projected earnings surge and a profit margin recovery you might not expect. Find out what really powers these bullish estimates and if they're within reach.

Result: Fair Value of $112.30 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, higher import costs and rising labor expenses could erode margins. This may leave Dollar Tree’s longer-term earnings growth more uncertain than current forecasts suggest.

Find out about the key risks to this Dollar Tree narrative.

Another View: What About the SWS DCF Model?

While analysts see Dollar Tree as undervalued based on expected earnings and market multiples, the SWS DCF model suggests the stock could be trading above its fair value. This approach considers future cash flows and uses an independent discount rate. It provides a more conservative read on what DLTR is worth. Could this more cautious perspective be signaling real risks or just a difference in focus?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dollar Tree for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dollar Tree Narrative

If you have a different perspective or want to dig into the fundamentals yourself, it takes just minutes to assemble your own narrative, your way with Do it your way.

A great starting point for your Dollar Tree research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for More Smart Investment Ideas?

Don’t let opportunities pass you by. Use the Simply Wall Street Screener to find stocks that could boost your returns and help you stay ahead of the crowd.

• Seize the chance to uncover these 894 undervalued stocks based on cash flows offering compelling value based on strong fundamentals and future cash flows.
• Tap into innovation by finding these 32 healthcare AI stocks set to transform patient outcomes with next-generation technology and artificial intelligence.
• Maximize your income by seeking out these 19 dividend stocks with yields > 3% that deliver substantial yields and steady payouts for income-focused investors.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com