On Friday, BMO Capital Markets adjusted its view on shares of Dollar General Corporation (NYSE: NYSE:DG), increasing the stock's price target from $80.00 to $84.00 while maintaining a Market Perform rating. According to InvestingPro data, the stock is currently trading at an attractive P/E ratio of 13.1x and appears slightly undervalued based on Fair Value analysis.
The decision came after the company's third-quarter results, which aligned with expectations aside from costs related to Hurricane impacts. Dollar General also revealed strategies to slow the opening of new stores in 2025, with plans to enhance the remodeling of existing locations. This approach is anticipated to provide some support for comparable store sales.
The analyst from BMO Capital noted that while double-digit percentage earnings per share (EPS) growth for Dollar General next year is unlikely, the company may benefit from continued positive shrink momentum. With current diluted EPS at $6.06 and revenue of $40.2 billion over the last twelve months, the company maintains its position as a prominent player in the Consumer Staples sector.
Consequently, the analyst slightly increased the forecast for the fiscal year 2026 EPS. The new price target of $84.00 is based on a 14 times price-to-earnings (P/E) ratio, which is a modest premium compared to Dollar Tree (NASDAQ:DLTR), reflecting Dollar General's more advanced digital capabilities.
The report acknowledges that Dollar General is ahead in terms of digital progress, which is a factor in the slightly higher valuation compared to its competitor. However, the analyst also pointed out potential digital headwinds that dollar stores might face. Despite these challenges, the updated price target suggests a stable outlook for Dollar General's financial performance.
Dollar General's stock price target update reflects the company's consistent performance and strategic initiatives aimed at boosting sales through store remodels. The analyst's comments highlight the expectation for Dollar General to maintain favorable shrink trends, which is the reduction of loss due to theft, damage, or error, contributing to the company's efficiency and profitability.
In summary, BMO Capital's revised price target for Dollar General indicates a belief in the company's ability to sustain its business growth and manage headwinds effectively. The maintained Market Perform rating suggests that the stock is expected to perform in line with the market or sector averages in the foreseeable future.
For deeper insights into Dollar General's valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 6 additional ProTips and detailed financial metrics in the Pro Research Report, helping investors make more informed decisions.
In other recent news, Dollar General has seen a range of analyst adjustments following its third-quarter results. Truist Securities lowered the company's price target to $83 from $94, maintaining a Hold rating. This adjustment came after the company's earnings results met revised forecasts, despite facing economic and competitive challenges. Dollar General's strategy shift from store expansion to store optimization was noted, seen as a long-term positive.
Simultaneously, BofA Securities upgraded Dollar General from Underperform to Buy, setting a new price target at $95. This upgrade was based on positive indicators from the company's "Back-to-Basics" strategy, which includes a reduction in inventory per store and increased stock levels.
Telsey Advisory Group also adjusted its stance, reducing the 12-month price target from $90 to $88, while maintaining a Market Perform rating. The group highlighted Dollar General's ongoing initiatives, such as store remodels and the expansion of fresh products, but expressed uncertainty surrounding the timing and impact of these initiatives.
Evercore ISI nudged its price target up to $96 while maintaining an In Line rating, noting a challenging retail environment but also recognizing positive developments, such as improved inventory efficiency. These developments offer a glimpse into the diverse perspectives on Dollar General's recent performance and future prospects.
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