Dollar Tree (NasdaqGS:DLTR) - Share price, News & Analysis

Q: What is the Fair Price of DLTR when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

DLTR ($156.27) is trading below our estimate of [[fair value]] ($249.93)

DLTR fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	2/6
Past Performance	3/6
Financial Health	5/6
Dividends	0/6

DLTR Stock Overview

Dollar Tree, Inc. operates discount variety retail stores.

Rewards

Trading at 37.5% below our estimate of its fair value

Earnings are forecast to grow 8.44% per year

Earnings grew by 1.5% over the past year

Risk Analysis

Significant insider selling over the past 3 months

Dollar Tree Competitors

Dollar General

NYSE:DG

US$55.9b

Target

NYSE:TGT

US$66.0b

Ollie's Bargain Outlet Holdings

NasdaqGM:OLLI

US$3.8b

MINISO Group Holding

NYSE:MNSO

US$2.5b

Price History & Performance

Summary of all time highs, changes and price drops for Dollar Tree
Historical stock prices
Current Share Price	US$156.27
52 Week High	US$177.19
52 Week Low	US$84.26
Beta	0.70
1 Month Change	-2.26%
3 Month Change	0.34%
1 Year Change	57.13%
3 Year Change	41.73%
5 Year Change	135.38%
Change since IPO	13,271.00%

Recent News & Updates

Jun 30

Dollar Tree Is Too Expensive

Dollar Tree has a strong track record of outperforming the broader market during times of low consumer confidence. On the other hand, the stock appears to be trading at a significant premium compared to the consumer discretionary sector median. While discount stores are well-positioned in times of low consumer confidence, and the firm has reported strong first quarter results, macroeconomic headwinds are likely to impact DLTR in the near-term. DLTR does not pay a dividend. Due to the high price multiples, we believe the stock is a sell at the current valuation. Dollar Tree's (DLTR) stock price has increased by about 11%, despite the relatively high volatility, compared to the 20% decline of the broader market year to date. Data by YCharts Although DLTR has a strong track record of outperforming the broader market in times of low consumer confidence, in our opinion the stock is significantly overvalued at the current price level. In light of the current macroeconomic environment, and the high valuation, we believe that Dollar Tree's stock is a sell now. In this article, we will dig deeper into why DLTR could be an attractive addition to your portfolio in times of low consumer confidence, and why we still believe that the valuation is too high. Let us start with taking a look at the U.S. consumer confidence. Consumer Confidence Consumer confidence is often used as a leading economic indicator, as it can signal potential trend changes in consumer spending in the near term. Therefore, it could be used to gauge, where we are in the current business cycle and form expectations about the spending behavior in the near future. U.S. Consumer confidence (Tradingeconomics.com) The U.S. consumer confidence has been declining steadily in the past months, declining to levels even lower than observed during the financial crisis in 2008-2009. Although consumer spending has remained strong in 2022, we expect the low consumer confidence to have severe implications in the near future. Low consumer confidence is likely to lead to a change in the consumer spending behavior. This change is likely to impact firms, which are selling durable goods first. Customers typically tend to cut or delay the purchase of durable goods, when confidence is low. After durable goods, non-essential, consumer discretionary products are impacted and last the services. Firms in the consumer staples sector are likely to remain relatively unaffected, as they are selling essential goods. Although DLTR is in the consumer discretionary sector because it sells a wide variety of products, discount retailers are actually positioned favorably during such times. This is because consumers are looking to reduce their spending, and they often switch to lower cost alternatives in cheaper stores. One of these lower cost alternatives could be Dollar Tree. Let us actually take a look at, Dollar Tree's stock price development during times of low consumer confidence in the last 20 years. 2001-2002 Data by YCharts In this 2-year time period, despite the high volatility of DLTR's stock price, it significantly outperformed the overall market. While DLTR remained flat, the broader market (SPY) has declined by as much as 33%. 2007-2010 Data by YCharts Between 2007 and 2010, DLTR's outperformance was even more impressive. While SPY has lost about 21%, Dollar Tree's share price has surged by more than 60%. 2011-2012 Data by YCharts While in this time frame, both DLTR and SPY have produced positive returns, once again DLT has substantially outperformed the market. Although past performance is not always a good indicator of the future performance, we believe that in the current low consumer confidence environment, the firm is well-situated to outperform the broader market. Even though we like the stock from this perspective, we believe that the macroeconomic headwinds are likely to create significant downward pressure on the firm's margins and earnings. Due to the high uncertainty with regard to commodity prices, transportation costs, supply chain disruptions and tight labor market, we expect the firm to face substantial challenges in the near term. Valuation DLTR's stock appears to be trading at a significant premium compared to the consumer discretionary sector median. The firm's P/E Non-GAAP ((FWD)) is 18.8x, compared with the sector median of 11.1x. This indicates a premium of about 70%. In terms of EV/EBITDA and P/CF, a similar trend can be observed. In our opinion, such an overvaluation is not justified, despite the strong financial performance in the first quarter. During the first quarter, DLTR has managed to open a significant amount of new stores and expand some of its already existing locations. The firm has also expanded its operating margin, despite the macroeconomic headwinds, and achieved record diluted earnings per share for the first quarter. We expect the demand for DLTR's products to remain high and even increase in the near term. However, in our opinion the margins are likely to decline due to the elevated energy prices, increased freight costs, supply chain disruptions and the tight labor market. Many firms in the first quarter have struggled with these macroeconomic headwinds, including other larger retailers. We expect that DLTR will face the same problems. Further, DLTR does not pay dividends, which make the stock an unattractive choice for many investors, who are looking for regular quarterly income in the volatile market environment. Last, but not least, Dollar Tree also has not returned any value to its shareholders by reducing the number of outstanding shares in the last decade. Shares outstanding (Seekingalpha.com) Although DLTR has not diluted its shareholders by issuing even more shares, we prefer to invest in firms, which have a strong track record of consistent share buyback programs. Before concluding, we also have to point out the recent announcement for leadership change in the company. The change of CFO and COO could also have implications for the performance of the firm in the near term.

Jun 02

Dollar Tree, Inc. (NASDAQ:DLTR) Shares Could Be 31% Below Their Intrinsic Value Estimate

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Dollar Tree, Inc...

Shareholder Returns

	DLTR	US Multiline Retail	US Market
7D	-0.5%	-4.5%	-2.2%
1Y	57.1%	-18.8%	-21.2%

Return vs Industry: DLTR exceeded the US Multiline Retail industry which returned -18.8% over the past year.

Return vs Market: DLTR exceeded the US Market which returned -21.2% over the past year.

Price Volatility

Is DLTR's price volatile compared to industry and market?
DLTR volatility
DLTR Average Weekly Movement	8.6%
Multiline Retail Industry Average Movement	10.4%
Market Average Movement	8.1%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.3%

Stable Share Price: DLTR is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 9% a week.

Volatility Over Time: DLTR's weekly volatility (9%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1986	136,226	Mike Witynski	https://www.dollartree.com

Dollar Tree, Inc. operates discount variety retail stores. It operates in two segments, Dollar Tree and Family Dollar. The Dollar Tree segment offers merchandise at the fixed price of $ 1.25.

Dollar Tree Fundamentals Summary

How do Dollar Tree's earnings and revenue compare to its market cap?
DLTR fundamental statistics
Market Cap	US$35.09b
Earnings (TTM)	US$1.49b
Revenue (TTM)	US$26.74b

23.6x

P/E Ratio

1.3x

P/S Ratio

Is DLTR overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
DLTR income statement (TTM)
Revenue	US$26.74b
Cost of Revenue	US$18.62b
Gross Profit	US$8.12b
Other Expenses	US$6.63b
Earnings	US$1.49b

Last Reported Earnings

Apr 30, 2022

Next Earnings Date

Aug 25, 2022

Earnings per share (EPS)	6.63
Gross Margin	30.37%
Net Profit Margin	5.57%
Debt/Equity Ratio	41.5%

How did DLTR perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is DLTR undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for DLTR?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for DLTR. This is calculated by dividing DLTR's market cap by their current preferred multiple.
What is DLTR's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$35.09b

DLTR key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.6x
Enterprise Value/EBITDA	15.7x
PEG Ratio	2.8x

Price to Earnings Ratio vs Peers

How does DLTR's PE Ratio compare to its peers?

DLTR PE Ratio vs Peers

The above table shows the PE ratio for DLTR vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	25x
DG Dollar General	24.6x	7.4%	US$55.9b
TGT Target	11.3x	11.8%	US$66.0b
OLLI Ollie's Bargain Outlet Holdings	33.4x	34.4%	US$3.8b
MNSO MINISO Group Holding	30.8x	45.2%	US$2.5b
DLTR Dollar Tree	23.6x	8.4%	US$35.1b

Forward PE

Price-To-Earnings vs Peers: DLTR is good value based on its Price-To-Earnings Ratio (23.6x) compared to the peer average (25x).

Price to Earnings Ratio vs Industry

How does DLTR's PE Ratio compare vs other companies in the Global Multiline Retail Industry?

Price-To-Earnings vs Industry: DLTR is expensive based on its Price-To-Earnings Ratio (23.6x) compared to the US Multiline Retail industry average (9.2x)

Price to Earnings Ratio vs Fair Ratio

What is DLTR's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

DLTR PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	23.6x
Fair PE Ratio	18.3x

Price-To-Earnings vs Fair Ratio: DLTR is expensive based on its Price-To-Earnings Ratio (23.6x) compared to the estimated Fair Price-To-Earnings Ratio (18.3x).

Share Price vs Fair Value

What is the Fair Price of DLTR when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: DLTR ($156.27) is trading below our estimate of fair value ($249.93)

Significantly Below Fair Value: DLTR is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: DLTR is poor value based on its PEG Ratio (2.8x)

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Future Growth

How is Dollar Tree forecast to perform in the next 1 to 3 years based on estimates from 22 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

8.4%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: DLTR's forecast earnings growth (8.4% per year) is above the savings rate (1.9%).

Earnings vs Market: DLTR's earnings (8.4% per year) are forecast to grow slower than the US market (13.6% per year).

High Growth Earnings: DLTR's earnings are forecast to grow, but not significantly.

Revenue vs Market: DLTR's revenue (5.3% per year) is forecast to grow slower than the US market (8.2% per year).

High Growth Revenue: DLTR's revenue (5.3% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: DLTR's Return on Equity is forecast to be high in 3 years time (20.9%)

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Past Performance

How has Dollar Tree performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

7.6%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: DLTR has high quality earnings.

Growing Profit Margin: DLTR's current net profit margins (5.6%) are lower than last year (5.7%).

Past Earnings Growth Analysis

Earnings Trend: DLTR's earnings have grown by 7.6% per year over the past 5 years.

Accelerating Growth: DLTR's earnings growth over the past year (1.5%) is below its 5-year average (7.6% per year).

Earnings vs Industry: DLTR earnings growth over the past year (1.5%) exceeded the Multiline Retail industry -4.9%.

Return on Equity

High ROE: DLTR's Return on Equity (18.1%) is considered low.

Discover strong past performing companies

Financial Health

How is Dollar Tree's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: DLTR's short term assets ($6.3B) exceed its short term liabilities ($4.3B).

Long Term Liabilities: DLTR's short term assets ($6.3B) do not cover its long term liabilities ($9.8B).

Debt to Equity History and Analysis

Debt Level: DLTR's net debt to equity ratio (26.7%) is considered satisfactory.

Reducing Debt: DLTR's debt to equity ratio has reduced from 112% to 41.5% over the past 5 years.

Debt Coverage: DLTR's debt is well covered by operating cash flow (41.4%).

Interest Coverage: DLTR's interest payments on its debt are well covered by EBIT (15.4x coverage).

Balance Sheet

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Dividend

What is Dollar Tree current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate DLTR's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate DLTR's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if DLTR's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if DLTR's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as DLTR has not reported any payouts.

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Management

How experienced are the management team and are they aligned to shareholders interests?

2.6yrs

Average management tenure

CEO

Mike Witynski (59 yo)

2yrs

Tenure

US$10,249,698

Compensation

Mr. Michael A. Witynski, also known as Mike, serves as President and Chief Executive Officer at Dollar Tree, Inc. since July 2020 and serves as its Director since September 23, 2020. He served as President...

CEO Compensation Analysis

Compensation vs Market: Mike's total compensation ($USD10.25M) is about average for companies of similar size in the US market ($USD13.34M).

Compensation vs Earnings: Mike's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: DLTR's management team is considered experienced (2.6 years average tenure).

Board Members

Experienced Board: DLTR's board of directors are not considered experienced ( 0.3 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: DLTR insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/07/04 00:00
End of Day Share Price	2022/07/01 00:00
Earnings	2022/04/30
Annual Earnings	2022/01/29