NEW YORK (TheStreet) -- Dollar General (DG - Get Report) shares are up 9.8% to $63.10 in pre-market trading on Monday after announcing that it was offering a bid of about $8.95 billion, or $78.50 per share, for fellow dollar store retailer Family Dollar (FDO) .
Dollar General outbid rival Dollar Tree (DLTR - Get Report) , which had previously offered $8.5 billion, or $74.50 per share, for the company last month.
Dollar General, which has 11,000 stores across the country, said that the merger would provide between $550 million and $600 million in savings through profit synergies three years after the deal closed if Family Dollar accepts.
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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, growth in earnings per share, increase in net income, 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 5.7%. 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.
- 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Multiline Retail industry average. The net income increased by 1.1% when compared to the same quarter one year prior, going from $220.08 million to $222.40 million.
- 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 -71.84%.
- You can view the full analysis from the report here: DG Ratings Report