Dollar General (DG) Is Today's Storm The Castle Stock

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.

Trade-Ideas LLC identified Dollar General ( DG) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Dollar General as such a stock due to the following factors:

  • DG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $347.4 million.
  • DG has traded 7.6 million shares today.
  • DG is trading at 3.16 times the normal volume for the stock at this time of day.
  • DG crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DG:

Dollar General Corporation, a discount retailer, provides merchandise products in the United States. DG has a PE ratio of 17.3. Currently there are 7 analysts that rate Dollar General a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Dollar General has been 5.7 million shares per day over the past 30 days. Dollar General has a market cap of $16.9 billion and is part of the services sector and retail industry. The stock has a beta of 0.31 and a short float of 3.2% with 1.31 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Monday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dollar General as a buy. 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 ratings report include:
  • The revenue growth came in higher than the industry average of 6.7%. 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 -79.30%.

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

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