Dollar General Corporation Stock Buy Recommendation Reiterated (DG)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Dollar General Corporation (NYSE: DG) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+ . The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • DG's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 10.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DOLLAR GENERAL CORP reported significant earnings per share improvement 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 $2.22 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.22).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multiline Retail industry. The net income increased by 46.6% when compared to the same quarter one year prior, rising from $146.04 million to $214.14 million.
  • Net operating cash flow has slightly increased to $180.85 million or 3.42% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.36%.
  • Powered by its strong earnings growth of 52.38% and other important driving factors, this stock has surged by 39.33% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

Dollar General Corporation operates as a discount retailer primarily in the southern, southwestern, midwestern, and eastern United States. The company has a P/E ratio of 19.8, equal to the average retail industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Dollar General has a market cap of $17.2 billion and is part of the services sector and retail industry. Shares are up 25.3% year to date as of the close of trading on Wednesday.

You can view the full Dollar General Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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