Dollar Tree Inc's (NASDAQ:DLTR) Earnings Grew 91.74%, Did It Beat Long-Term Trend?

In this commentary, I will examine Dollar Tree Inc's (NASDAQ:DLTR) latest earnings update (03 February 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the multiline retail industry performed. As an investor, I find it beneficial to assess DLTR’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Dollar Tree

How Well Did DLTR Perform?

To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess various companies on a more comparable basis, using the most relevant data points. For Dollar Tree, its latest trailing-twelve-month earnings is US$1.71B, which compared to last year’s level, has jumped by an impressive 91.74%. Since these values are relatively nearsighted, I have estimated an annualized five-year figure for Dollar Tree's net income, which stands at US$639.59M This means generally, Dollar Tree has been able to steadily raise its profits over the last few years as well.

What's the driver of this growth? Let's see whether it is merely because of industry tailwinds, or if Dollar Tree has seen some company-specific growth. The rise in earnings seems to be propelled by a substantial top-line increase overtaking its growth rate of costs. Though this brought about a margin contraction, it has made Dollar Tree more profitable. Eyeballing growth from a sector-level, the US multiline retail industry has been growing its average earnings by double-digit 17.33% in the prior twelve months, and a more subdued 6.34% over the past five years. This means that whatever tailwind the industry is benefiting from, Dollar Tree is able to amplify this to its advantage.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Dollar Tree to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for DLTR’s future growth? Take a look at our free research report of analyst consensus for DLTR’s outlook.
2. Financial Health: Is DLTR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 03 February 2018. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.