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Why Dollar General (DG) Stock Is Down Today

Stocks in this article: DG

NEW YORK (TheStreet) -- Dollar General  (DG) stock fell Friday after the company announced CEO Rick Dreiling would retire next year.

The move is effective May 30, 2015 or upon appointing his successor. Dreiling has served as CEO since Jan. 2008 and became chairman later that year. Dollar General said he would stay on as chairman during a transitional period after the company appoints a new CEO.

"After considerable reflection, I am at a point where it is appropriate to begin to plan for my retirement," Dreiling said. He added he would help the company's board recruit a new chief executive and then mentor him or her.

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During Dreiling's time as CEO, Dollar General's annual sales increased more than 80% to $17.5 billion in 2013, the company said in its statement. Dollar General's number of stores increased 38% to more than 11,000 stores in 40 states.

The stock was down 6% to $57.98 at 10;13 a.m.

TheStreet Ratings team rates DOLLAR GENERAL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate DOLLAR GENERAL CORP (DG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, growth in earnings per share, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues slightly increased by 6.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • DOLLAR GENERAL CORP has improved earnings per share by 7.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DOLLAR GENERAL CORP increased its bottom line by earning $3.17 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($3.51 versus $3.17).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Multiline Retail industry and the overall market, DOLLAR GENERAL CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 70.79% to $251.46 million when compared to the same quarter last year. In addition, DOLLAR GENERAL CORP has also vastly surpassed the industry average cash flow growth rate of -79.52%.
  • You can view the full analysis from the report here: DG Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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