Does Dollar General’s 2025 Rally Still Leave Upside After a 75% Share Price Surge?

• Wondering if Dollar General at around $132 a share is a comeback bargain or a value trap? This breakdown will help you decide whether the recent rally still leaves room on the upside.
• The stock has surged 20.9% in the last week, 31.6% over the past month, and is up 75.0% year to date and 66.4% over the last year, even though the 3 year and 5 year returns are still negative.
• Recent gains have come as investors warm back up to defensive retail names and reassess Dollar General's ability to navigate a tougher consumer backdrop and competitive discount landscape. The market seems to be rotating back into more stable cash flow stories, and Dollar General has been pulled along as sentiment improves around value focused retailers.
• Despite that optimism, Dollar General only scores a 2/6 valuation check score. We will dig into what different valuation methods say about the stock today and then finish by exploring a more holistic way to judge whether it really looks cheap or expensive.

Dollar General scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Dollar General Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes the cash Dollar General is expected to generate in the future and discounts those projections back to what they are worth in $ today, giving an estimate of intrinsic value per share.

Dollar General currently produces about $2.06 billion in free cash flow, and analysts plus Simply Wall St projections see this remaining robust, with free cash flow still around $1.88 billion by 2030. The detailed 10 year forecast, which combines analyst estimates for the next few years and then extrapolates further out, implies that these cash flows can comfortably support the current business and gradual growth.

Using a 2 Stage Free Cash Flow to Equity model, this stream of cash flows translates into an estimated intrinsic value of roughly $174.90 per share, compared with the recent share price near $132. That implies the stock is about 24.3% undervalued on a DCF basis, indicating that the market may not be fully pricing in its long term cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Dollar General is undervalued by 24.3%. Track this in your watchlist or portfolio, or discover 906 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Dollar General.

Approach 2: Dollar General Price vs Earnings

For a consistently profitable retailer like Dollar General, the price to earnings (P/E) ratio is a useful way to gauge whether investors are paying a reasonable price for each dollar of current earnings. In general, companies with stronger growth prospects and lower perceived risk can justify a higher P/E, while slower growth or higher uncertainty usually warrant a lower, more conservative multiple.

Dollar General currently trades at about 22.8x earnings, slightly above both the Consumer Retailing industry average of around 20.8x and the peer average near 20.1x. On the surface that premium suggests investors are already paying up a bit versus comparable retailers.

Simply Wall St’s Fair Ratio framework refines this comparison by estimating what P/E Dollar General should trade on, given its earnings growth outlook, profitability, risk profile, industry, and market cap. That Fair Ratio comes out at roughly 21.4x, implying the shares are pricing in more optimism than this model supports, and pointing to a modest degree of overvaluation on a P/E basis.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Dollar General Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple idea where you write the story you believe about a company and then link that story to a concrete forecast and fair value. On Simply Wall St’s Community page, millions of investors use Narratives to spell out their assumptions for a company’s future revenue, earnings and margins. The platform then converts those assumptions into a projected fair value that can be compared directly to today’s share price to help decide whether it looks like a buy, hold or sell. Because Narratives are updated dynamically when new information arrives, such as earnings or major news, your fair value estimate stays aligned with the latest data instead of going stale. For Dollar General, for example, one bullish Narrative might lean on store expansion, digital delivery and margin improvement to justify a fair value closer to the higher analyst target around $138, while a more cautious Narrative might emphasize rural saturation, competition and labor costs to anchor fair value closer to the low end near $80.

Do you think there's more to the story for Dollar General? Head over to our Community to see what others are saying!

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.

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