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Stock of the week for 02/23/2015: Dollar General (DG)
Discount retailer Dollar General sells food, snacks, health and beauty aids, cleaning supplies, basic apparel, housewares, seasonal items, and more. With more than 11,700 stores in 40 states, Dollar General has more retail locations than any retailer in America. It has a market cap of $21.5-billion (U.S.).
The company has a return on capital using the Joel Greenblatt-based model’s EBIT/tangible capital employed metric of 51.8 per cent.
It has grown EPS at a 36-per-cent clip over the long term (using an average of 3, 4 and 5yr EPS growth rates), part of why it gets strong interest from Peter Lynch model. The Lynch model also likes its 0.59 P/E-to-growth ratio. It has debt/equity ratio of 52 per cent, which the Lynch model thinks is reasonable.
Dollar General has averaged net profit margin of 5.7 per cent over past three years, which the Kenneth Fisher-based model likes.
It has a 19 per cent return on equity and has averaged a 15.8-per-cent return on retained earnings (those not paid out as dividends) over past decade, which the Warren Buffett-based model likes.
It also has a 72 relative strength over past 12 months.
Dollar General could be in for short term volatility as its bid for Family Dollar plays out.
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