Strong On High Volume: Dollar Tree Stores (DLTR)

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 Tree Stores ( DLTR) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Dollar Tree Stores as such a stock due to the following factors:

  • DLTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $134.8 million.
  • DLTR has traded 1.1 million shares today.
  • DLTR is trading at 13.53 times the normal volume for the stock at this time of day.
  • DLTR is trading at a new high 5.06% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. 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. 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 DLTR:

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise at the fixed price of $1.00. DLTR has a PE ratio of 22.0. Currently there are 14 analysts that rate Dollar Tree Stores a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Dollar Tree Stores has been 2.4 million shares per day over the past 30 days. Dollar Tree Stores has a market cap of $12.7 billion and is part of the services sector and retail industry. The stock has a beta of 0.70 and a short float of 1.7% with 1.62 days to cover. Shares are up 11% year-to-date as of the close of trading on Wednesday.

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 Tree Stores as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, notable return on equity, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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 5.3% 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 ($3.06 versus $2.75).
  • 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.
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that DLTR's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
  • 36.63% is the gross profit margin for DOLLAR TREE INC which we consider to be strong. Regardless of DLTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DLTR's net profit margin of 5.97% compares favorably to the industry average.

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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