On Wednesday, CFRA, a financial research firm, adjusted its price target for Dollar Tree (NASDAQ: NASDAQ:DLTR), increasing it marginally from $74.00 to $75.00, with the stock currently trading at $74.32. The firm has chosen to maintain its Hold rating on the stock. According to InvestingPro analysis, Dollar Tree appears undervalued based on its Fair Value metrics, despite experiencing a significant 39.75% decline over the past six months.
The revision reflects a modest increase in the 12-month target price, now set at $75, which is based on 12 times the forecasted earnings per share (EPS) for fiscal year 2026 ending in January, now estimated at $6.24, up from the previous estimate of $6.14. The EPS forecast for fiscal year 2025 remains unchanged at $5.49.
CFRA's valuation of Dollar Tree at 12 times the projected EPS contrasts with the stock's 19 times long-term average earnings multiple. The firm justifies the discounted rate due to the ongoing uncertainty surrounding the future of Dollar Tree's Family Dollar banner and the company's recent below-average comparable sales growth.
The company reported adjusted earnings per share of $1.12 for the third fiscal quarter, marking a 16% increase year-over-year and surpassing expectations by $0.04. Comparable sales growth was reported at 1.8%, which is higher than the consensus estimate of 1.4%. InvestingPro data reveals that management has been aggressively buying back shares, and analysts expect the company to return to profitability this year.
Get access to 4 additional exclusive ProTips and comprehensive financial analysis through InvestingPro's detailed research reports. This growth was consistent across both Dollar Tree and Family Dollar stores, with comparable sales increases of 1.8% and 1.9%, respectively.
The conversion of Dollar Tree stores to a multi-price point format has been cited as a positive contributor to comparable sales. Furthermore, Dollar Tree has experienced robust non-comparable sales growth, driven by the rapid pace of new store openings and the early success following the acquisition of 99 Cents Only stores. The recent quarter's performance has been characterized as solid, particularly in light of several preceding quarters that failed to meet expectations.
However, CFRA points out that there are risks looming on the horizon as the calendar year 2025 approaches. Potential challenges include the impact of tariffs, reductions in the Supplemental Nutrition Assistance Program (SNAP), and increased ocean freight costs. InvestingPro's financial health analysis shows that while the company's cash flows can sufficiently cover interest payments, its overall financial health score is rated as "FAIR" with a score of 2.24 out of 5.
Discover the complete analysis and over 30 key financial metrics in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. Additionally, Dollar Tree is currently operating with an interim CEO and is in the process of searching for a new CFO.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.