DOLLAR GENERAL CORP (DG): what the price requires
The current priced-in claim for DOLLAR GENERAL CORP (DG) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DG
Headline
| Field | Value |
|---|---|
| Ticker | DG |
| Company | DOLLAR GENERAL CORP |
| Current price | $123.42/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin today | 5.2% |
| Multiple paid | 19x operating income |
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 6% cost of capital with 4% terminal growth over a 5-year stage (computed at the 6% minimum rate; the CAPM rate 5.7% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~14.8%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.82σ |
| cohort percentile (of 69 peers) | 54 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.55x | 5 | expensive |
| Earnings | 2.23x | 5 | expensive |
| Relative | 0.50x | 5 | justifies |
| Growth | 0.90x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $244.78 | 0.50x | yes | FCF base $2.2B, growth 5% (input: historical growth), terminal g 4.0%, WACC 7.2%, 5yr projection |
| DCF Exit Multiple | Growth | $136.46 | 0.90x | yes | Exit EV/EBITDA: 10.5x / 12.5x / 14.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $153.95 | 0.80x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.5x / 22.0x / 25.5x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $76.34 | 1.62x | yes | BV/sh $39.91, ROE (TTM) 17.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $104.22 | 1.18x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $93.34 | 1.32x | yes | Rev $43.1B, growth 5% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.7x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $247.45 | 0.50x | yes | EPS $7.07, growth 35% (input: historical EPS growth), PEG=0.50 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $55.28 | 2.23x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $2.57B × (1−25%) / WACC 7.2% → EPV (no growth) |
| Residual Income | Asset | $103.98 | 1.19x | yes | BV $39.91 + 5yr PV of (ROE (TTM) 17.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $79.68 | 1.55x | yes | √(22.5 × EPS $7.07 × BVPS $39.91) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $145.31 | 0.85x | yes | EBITDA $3.33B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $42.29 | 2.92x | yes | FCF $2201.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $37.50 | 3.29x | yes | SBC-adj FCF $2.10B (FCF $2.20B − SBC $0.10B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $228.13 | 0.54x | yes | EPS $7.07 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $11.36 | 10.86x | yes | BV $39.91 × (ROIC 2.1% / WACC 7.2%) |
| P/Sales Sector | Relative | $388.84 | 0.32x | yes | Revenue $43.08B × sector P/S 2.0x |
| PEG Fair Value | Relative | $265.13 | 0.47x | yes | EPS $7.07 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $76.43 | 1.61x | yes | EPS $7.07 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.2b |
| Net debt / NOPAT (after-tax) | 1.92x |
| Net debt / operating income (pre-tax) | 1.44x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Dollar General is a mature retailer in a margin recovery: Q1 fiscal 2026 same-store sales rose 2.0% on a fourth straight quarter of traffic growth, operating profit climbed 10.8%, and gross margin recovered 65 basis points to 31.6% on lower shrink.
- The defining risk is its fragile core customer and a thin 5.3% operating margin: the 10-K names inflation, tariffs, and cuts to SNAP and other assistance as direct pressures, and 2026 brought a significant reduction in SNAP dollars distributed.
- Watch shrink normalization and the consumer against Walmart and Dollar Tree: management raised full-year EPS guidance to $7.20 to $7.45, but part of the margin recovery is one-time and the macro pressures on the customer are forward.
Bull Case
Dollar General is a mature retailer in the middle of a margin recovery, and that stage is the key to reading its numbers correctly. The trailing figures still carry the scars of a downturn where margins collapsed and the company had to defend its balance sheet, so a backward-looking earnings lens understates where the business is heading. What matters at this stage is the direction of travel, and the direction turned in the most recent quarter. First-quarter fiscal 2026 net sales rose 3.4% to $10.8 billion, same-store sales increased 2.0% on a 1.4% gain in customer traffic, the fourth consecutive quarter of traffic growth, and operating profit climbed 10.8% to $638.5 million. Profit growing faster than sales is the signature of a recovery taking hold rather than a business merely holding its ground.
The recovery is most visible in the line that broke first and is healing first: gross margin. It expanded 65 basis points to 31.6%, helped by higher inventory markups and, importantly, lower shrink and damages, the exact dynamic that had compressed profitability into the downturn. Diluted EPS rose 12.4% to $2.00. The company is spending to compound that recovery rather than to dress up the headline, opening 195 new stores, remodeling 1,370, and closing only 33 in the quarter. Remodels are the highest-return use of capital a mature retailer has, lifting sales and margins in boxes the company already owns, and the share count has barely moved, down under 1% a year, a deliberate tilt toward reinvestment over financial engineering.
The value proposition is pulling in customers a dollar store does not usually reach. The $1 Value Valley assortment posted an 18.4% comparable increase and drew higher-income shoppers trading down, including households earning over $100,000, while expanding delivery added to the basket. For a mature retailer, the bull case is not a growth story; it is a quality-of-earnings story. The margin that fell is climbing back, the traffic is positive four quarters running, and management raised full-year EPS guidance to $7.20 to $7.45 from $7.10 to $7.35. The price asks the business not to shrink, and the recent prints show it doing better than that.
Bear Case
The variable with the most leverage over Dollar General is one it does not control: government policy toward its core customer, and the most acute version is SNAP. A large share of Dollar General's shoppers rely on food assistance, and 2026 brought a significant reduction in overall SNAP dollars distributed. The 10-K names the forces in the customer's spending plainly, citing "unemployment and underemployment rates, inflation, wage growth, changes in U.S. and global trade policy, and changes in U.S. government policy and assistance programs (including cost of living adjustments), such as SNAP, unemployment benefits, and economic stimulus programs". It adds that "many of our customers have fixed or low incomes and limited discretionary" spending. When the SNAP dollars shrink, the budget of the most fragile customer in retail shrinks with them, and the price, busy crediting the margin recovery, gives little weight to that overhang.
Tariffs sit right behind SNAP as a macro lever. They raise the landed cost of the imported general merchandise that carries Dollar General's better margins, and a dollar store that has to pass those costs through erodes the very value perception that defines it. The company itself flags trade policy as a direct input to its costs, and its guidance deliberately excludes any benefit from potential tariff refunds, which is to say management is not banking on relief. The recovery that the bulls celebrate, lower shrink and better markups, is partly a normalization that does not repeat, while the tariff and SNAP pressures are forward and structural. If price increases meet a weakened customer, the traffic that has been positive for four quarters is the first thing to give.
The competitive squeeze is the structural risk the recovery does not resolve, and it compounds the macro one. Dollar General competes for the same low-income wallet as Walmart and Dollar Tree, both with their own scale and pricing power, and the operating margin it is defending is thin at about 5.3%. On the price, the disagreement among the methods is the tell: the peer-multiple and growth lenses read the stock as supported, but the earnings-power lens reads it as expensive at roughly 1.8 times its estimate, because trailing earnings still sit below the company's pre-downturn level. The bull says that lens has not yet credited the recovery; the bear says it is the lens that does not assume the macro pressure abates. The bet is that a fragile customer, squeezed by SNAP cuts and tariffs, keeps showing up and keeps trading the same basket. The price treats that as close to a given.
Valuation
Dollar General is priced for very little, which is either the opportunity or the warning. At about $106 the market pays roughly 20 times company-wide operating income, but on a multiple in the lower half of the discount-retail peer range, and the embedded assumption is only about 0.3% annual operating growth over the forecast. The price is not demanding a robust recovery; it is asking the business merely not to shrink. That low bar is the heart of the value read: very little has to go right for the price to be reasonable, and the recent quarter delivered more than nothing.
The families of method split on whether even that modest bar is fair, and the split is itself the information. The peer-multiple comparison reads the stock as well below where discount retailers trade, and the growth lens reads it as supported, so on peers and on forward economics there is no premium to defend. The earnings-power lens disagrees, reading the price as expensive at about 1.8 times its estimate, because it anchors on trailing earnings that still sit below the company's pre-downturn level after the margin collapse. The reason the two lenses disagree is timing: the earnings-power view has not yet credited the recovery the first quarter showed, with operating profit up 10.8% and gross margin up 65 basis points to 31.6%. Whether the stock is cheap or fully valued turns on whether that recovery is durable or a one-quarter normalization of shrink.
On solvency, Dollar General carries about $3.2 billion of net debt against trailing operating income, roughly 1.4 times, a manageable load for a stable retailer but a reason the company has tilted capital toward debt discipline and reinvestment rather than buybacks. The most decisive question for the price is not the balance sheet; it is the durability of the gross-margin recovery against a customer whose budget is exposed to SNAP cuts and whose imported merchandise is exposed to tariffs. If the margin holds, the low embedded growth bar makes the price look conservative. If it reverts, the earnings-power lens is the honest anchor.
Catalysts
Dollar General's first quarter of fiscal 2026, reported in early June, showed the turnaround gaining traction. Net sales rose 3.4% to $10.8 billion, same-store sales increased 2.0% on a 1.4% gain in customer traffic and a 0.5% larger basket, and operating profit climbed 10.8% to $638.5 million. The headline was margin: gross margin expanded 65 basis points to 31.6%, helped by higher inventory markups and lower shrink and damages, reversing the dynamic that had compressed profitability. Diluted EPS rose 12.4% to $2.00, and the company opened 195 stores, remodeled 1,370, and closed 33. Management raised full-year EPS guidance to $7.20 to $7.45 and net-sales growth to 3.7% to 4.2%.
The forward catalysts run through the consumer and the value initiatives. The $1 Value Valley program posted an 18.4% comparable increase and drew higher-income shoppers trading down, while management noted it grew share of wallet with SNAP customers even as overall SNAP dollars fell in 2026. That share gain against a shrinking benefit pool is the live question: it shows the value proposition working, but it depends on a customer base under real strain from reduced assistance and higher fuel prices.
The macro overhang frames every forward print. Management's guidance explicitly excludes any benefit from potential tariff refunds, signaling it is not relying on relief, while tariffs raise the cost of imported merchandise that carries the better margins. The next several quarters will test whether the shrink improvement and traffic gains persist once the easy comparisons pass, and whether the fragile core customer keeps trading down to Dollar General or gets squeezed out of the basket entirely. Those are the events most likely to move the thesis.
Peer Cohorts (Per Segment, With Filing Citations)
Discount retail (single reportable segment) (reported)
- DLTR (DOLLAR TREE, INC.)
- (no filing in the citation store)
- FIVE (Five Below, Inc.)
- (no filing in the citation store)
- OLLI (Ollie’s Bargain Outlet Holdings, Inc.)
- (no filing in the citation store)
- TGT (TARGET CORPORATION)
- (no filing in the citation store)
- BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 fiscal 2026 earnings release