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Why Dollar Tree (DLTR) Stock Is Down Today

Stocks in this article: DLTR

NEW YORK (TheStreet) -- Dollar Tree  (DLTR) fell Monday after Dollar General  (DG) outbid the company for fellow dollar store retailer Family Dollar  (FDO) .

Dollar General offered $9.7 billion, or $78.50 a share, for Family Dollar, while Dollar Tree had previously offered $8.5 billion, or $74.50 a share, in July.

The merged company would have nearly 20,000 stores in 46 U.S. states. Dollar General said it expects revenue to reach $28 billion and expects the deal to generate synergies of $550 million to $600 million three years after the deal closes should Family Dollar accept it. Dollar General also expects the merger to lead to double-digit adjusted earnings per share growth in the low double digits in the first full-year following the deal, less the costs tied to the merger.

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Dollar Tree stock was down 2.08% to $54.45 at 3:17 p.m. More than 7 million shares had changed hands, compared to the average volume of 2,687,760.

For more on Dollar General's offer to buy Family Dollar watch the video below:


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Separately, TheStreet Ratings team rates DOLLAR TREE INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate DOLLAR TREE INC (DLTR) 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. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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 7.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DOLLAR TREE INC has improved earnings per share by 13.6% 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 TREE INC increased its bottom line by earning $2.75 versus $2.70 in the prior year. This year, the market expects an improvement in earnings ($3.14 versus $2.75).
  • 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 3.6% when compared to the same quarter one year prior, going from $133.50 million to $138.30 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Multiline Retail industry and the overall market, DOLLAR TREE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 53.28% to $198.20 million when compared to the same quarter last year. In addition, DOLLAR TREE INC has also vastly surpassed the industry average cash flow growth rate of -71.84%.
  • You can view the full analysis from the report here: DLTR Ratings Report

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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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