Dollar Tree, Inc. (NASDAQ:DLTR) Not Flying Under The Radar

It's not a stretch to say that Dollar Tree, Inc.'s (NASDAQ:DLTR) price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" for companies in the Consumer Retailing industry in the United States, where the median P/S ratio is around 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Dollar Tree

How Dollar Tree Has Been Performing

There hasn't been much to differentiate Dollar Tree's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dollar Tree.

Is There Some Revenue Growth Forecasted For Dollar Tree?

The only time you'd be comfortable seeing a P/S like Dollar Tree's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 5.0% gain to the company's revenues. The latest three year period has also seen a 20% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 3.0% per year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 4.3% per annum growth forecast for the broader industry.

In light of this, it's understandable that Dollar Tree's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Dollar Tree maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Dollar Tree with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Dollar Tree, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.