The firm said it raised its rating on the discount variety retail chain as it believes labor and wage trends are continuing to improve.
"Labor and wage trends for lower/middle-income consumers continue to improve modestly and the eventual conversion of Family Dollar (FDO) to Dollar Tree (DLTR) stores should provide an incremental sales lift for Dollar General," RBC said in an analyst note.
The firm has an $86 price target on Dollar General, up from its previous $82 price target.
"Further, GMs are starting to improve. If stacked sales trends and margins continue to improve as we expect, we believe Dollar General shares can support a higher multiple," the note continued.
Shares of Dollar General are up by 0.47% to $76.28 at the start of trading on Wednesday morning.
Separately, 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, solid stock price performance, growth in earnings per share, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."