Stock Analysis

Dollar General Corporation (NYSE:DG) Just Reported And Analysts Have Been Lifting Their Price Targets

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Last week, you might have seen that Dollar General Corporation (NYSE:DG) released its full-year result to the market. The early response was not positive, with shares down 3.4% to US$152 in the past week. Results were roughly in line with estimates, with revenues of US$39b and statutory earnings per share of US$7.55. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Dollar General after the latest results.

See our latest analysis for Dollar General

NYSE:DG Earnings and Revenue Growth March 16th 2024

Taking into account the latest results, the consensus forecast from Dollar General's 29 analysts is for revenues of US$40.8b in 2025. This reflects an okay 5.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to reduce 3.8% to US$7.28 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$40.3b and earnings per share (EPS) of US$7.49 in 2025. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 8.2% to US$154, suggesting the revised estimates are not indicative of a weaker long-term future for the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Dollar General analyst has a price target of US$180 per share, while the most pessimistic values it at US$118. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Dollar General's revenue growth is expected to slow, with the forecast 5.5% annualised growth rate until the end of 2025 being well below the historical 8.5% p.a. growth over the last five years. Compare this to the 60 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.5% per year. Factoring in the forecast slowdown in growth, it looks like Dollar General is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dollar General. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Dollar General. Long-term earnings power is much more important than next year's profits. We have forecasts for Dollar General going out to 2027, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Dollar General that you should be aware of.

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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.