NEW YORK (TheStreet) -- Dollar General (DG) shares are up 1% to $66.75 in trading on Thursday after the discount retailer said that it is still committed to purchasing rival Family Dollar (FDO) and announced that it's in talks with the FTC over how many stores the company will have to divest as part of its bid for the company.
The New York Post reported yesterday that the company may have to give up as many as 4,000 stores to appease antitrust regulators, more than double the 1,500 stores it had originally expected to have to divest.
Family Dollar has already accepted a lower offer from Dollar Tree (DLTR) , though it announced yesterday that it was postponing a shareholders meeting to December 23 from its previously scheduled date of December 11.
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, increase in stock price during the past year, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 7.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- DOLLAR GENERAL CORP has improved earnings per share by 10.7% 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 ($3.50 versus $3.17).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Multiline Retail industry average, but is less than that of the S&P 500. The net income increased by 2.4% when compared to the same quarter one year prior, going from $245.48 million to $251.26 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.
- You can view the full analysis from the report here: DG Ratings Report