DOLLAR TREE, INC. (DLTR): what the price requires
At today's price, DOLLAR TREE, INC. (DLTR) is priced for +7.4% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/DLTR
Headline
| Field | Value |
|---|---|
| Ticker | DLTR |
| Company | DOLLAR TREE, INC. |
| Current price | $126.66/sh |
| Composition | Consumable 49% / Variety 46% / Seasonal 6% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 3.0% |
| Operating margin today | 7.6% |
| Margin compression implied | -4.6pp |
| Implied growth | 7.4% |
| Multiple paid | 22x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.6% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.8pp.
Reconcile: at the x-ray's 9.3% required return this reads ~19.6%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.26σ |
| cohort percentile (of 69 peers) | 62 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple; asset-based/earnings-power/growth-DCF 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 | 1.80x | 5 | expensive |
| Earnings | 1.84x | 3 | expensive |
| Relative | 0.63x | 5 | justifies |
| Growth | 2.25x | 1 | expensive |
Families that justify the price: Relative Families that call it expensive: Asset, Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.0%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $0.00 | — | no | Negative/zero FCF — equity value floored at $0 |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $132.79 | 0.95x | yes | P/E 22x (static sector reference · 2026-04), scenarios: 18.7x / 22.0x / 25.3x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $70.45 | 1.80x | yes | BV/sh $17.77, ROE (TTM) 36.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $151.77 | 0.83x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $56.28 | 2.25x | yes | Rev $19.7B, growth -15% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $222.95 | 0.57x | yes | EPS $6.37, growth 35% (input: historical EPS growth), PEG=0.56 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $45.45 | 2.79x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.56B × (1−25%) / WACC 8.0% → EPV (no growth) |
| Residual Income | Asset | $110.43 | 1.15x | yes | BV $17.77 + 5yr PV of (ROE (TTM) 36.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $50.46 | 2.51x | yes | √(22.5 × EPS $6.37 × BVPS $17.77) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $125.45 | 1.01x | yes | EBITDA $2.24B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $205.54 | 0.62x | yes | EPS $6.37 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $7.85 | 16.14x | yes | BV $17.77 × (ROIC 3.5% / WACC 8.0%) |
| P/Sales Sector | Relative | $200.08 | 0.63x | yes | Revenue $19.75B × sector P/S 2.0x |
| PEG Fair Value | Relative | $238.88 | 0.53x | yes | EPS $6.37 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $68.86 | 1.84x | yes | EPS $6.37 / 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 | $2.5b |
| Net debt / NOPAT (after-tax) | 2.37x |
| Net debt / operating income (pre-tax) | 1.78x |
| Share count CAGR (buyback) | -3.4% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
Now a pure Dollar Tree banner after the Family Dollar sale, the company is leaning on its multi-price strategy, adding $3, $4, and $5 items to lift ticket and margin. First-quarter 2026 comparable sales rose 3.5% and adjusted EPS jumped 38%.
At about $112 the price inverts to roughly 4% operating-profit growth a year, an undemanding bar that the relative-multiple and forward-growth methods support while the asset-based methods say expensive.
The key tension is tariffs. As an importer of discretionary goods, Dollar Tree's margin gains depend on mitigating import-cost pressure, and management's own filings flag that mitigation steps could reduce competitiveness if they go too far. Analysts sit at a Hold with targets near $117.
Bull Case
Begin with the worry that hangs over every dollar-store thesis: tariffs. Dollar Tree imports a large share of its discretionary merchandise, so a rising tariff bill lands directly on the cost of goods that fill a fixed-price store. The company's own filings concede the bind, noting that steps to mitigate tariffs, whether a change in product assortment, a reduced offering, or higher prices, could reduce the competitiveness of its products if competitors do not keep pace (Dollar Tree FY2025 10-K, accession 0000935703-25-000015). That is the real risk. The question is whether the recent data shows the company managing it, and so far it does.
The first-quarter 2026 results were strong on exactly the metrics that matter. Net sales rose 7.2% to $4.97 billion on a 3.5% comparable-store increase, and crucially, gross margin expanded 120 basis points, lifting adjusted earnings per share 38% to $1.74. Margin expanding while the company absorbs tariff pressure is the proof point the bull case needs: it suggests the multi-price strategy and operational improvements are outrunning the cost headwind. The company now operates as a focused Dollar Tree banner after divesting Family Dollar, with transition-services income of $21.1 million still flowing in, so management can put its full attention on a single, higher-returning concept.
The multi-price expansion is the growth engine. The filings describe moving beyond the $1.25 base point into $3, $4, and $5 products across discretionary, frozen, and other categories to deliver greater value and increase traffic and store productivity (Dollar Tree FY2025 10-K, accession 0000935703-25-000015). That is a self-help lever that raises ticket and margin without needing macro tailwinds. Full-year guidance calls for 3% to 4% comparable growth and adjusted EPS of $6.70 to $7.10, high-teens growth off the prior year. At about $112 the price requires only roughly 4% operating-profit growth, a bar the multi-price rollout and store productivity gains can clear, and trailing return on equity is a striking 36.7%, evidence of a business that earns well on the capital it deploys.
Bear Case
The fragile assumption baked into the price is that the recent margin expansion is durable rather than a favorable moment. The whole bull case rests on the multi-price strategy lifting gross margin faster than tariffs and wage costs push it down, and that is a delicate balance for a value retailer. The company's filings are explicit that its tariff mitigation, whether changing assortment, cutting the offering, or raising price, could reduce competitiveness if it overshoots (Dollar Tree FY2025 10-K, accession 0000935703-25-000015). A dollar store that raises prices to protect margin risks the very value proposition that brings customers through the door. The 120-basis-point margin gain in the first quarter is impressive, but it is one quarter, and the second-quarter guide of $1.00 to $1.15 adjusted EPS on 2.5% to 3.5% comps implies a more normal cadence ahead.
The second baked-in assumption is that the multi-price expansion keeps compounding the ticket. Moving from $1.25 to $3, $4, and $5 price points raises the average basket, but it also reshapes the brand from strict price certainty toward a broader value retailer, and it is not guaranteed that the core customer follows at every step. If multi-price adoption plateaus, the ticket-driven comp growth the price assumes thins out. Cash flow is another caution: trailing free cash flow is negative, which the models flag, reflecting heavy capital spending on store conversions and the costs around the Family Dollar separation, so the earnings growth is not yet translating cleanly into free cash.
The valuation already credits the plan working. The relative methods, near $141 on a sector P/E and $125 on EV/EBITDA, sit above the price, and the asset-based simple excess-return method lands near $70, well below it, so the picture is of a stock priced for continued execution rather than one with a wide cushion. Analysts reflect the ambivalence with a Hold consensus and targets clustered near $117, only modestly above the price, and a meaningful share carry sell ratings. The bet at $112 (June 27, 2026) is that a newly streamlined dollar store keeps expanding margin through a tariff-pressured, value-sensitive environment, and that is precisely the kind of narrative-dependent assumption that gets repriced quickly if a single quarter disappoints.
Valuation
At about $112 the price inverts to roughly 4% operating-profit growth a year over five years, with implied margin near 2.5% against today's 8.8%. The solve runs at a 7.5% cost of capital, and it is sensitive: each percentage point of cost of capital moves the implied growth by roughly 7.6 points, so the read is approximate. The implied pace is undemanding against the company's recent results, which makes the embedded assumption modest and shifts the question to durability of the margin rather than the growth rate.
The model X-ray is mixed. The cash-flow DCFs are floored at zero because trailing free cash flow is negative, a consequence of heavy reinvestment and separation costs, so they drop out. The relative methods carry the read: the sector-P/E method lands near $141 and EV/EBITDA near $125, both above the price, while the price-to-sales and PEG-based methods reach well higher on the strong recent EPS growth. The asset-based methods split, with simple excess return near $70 but residual income near $110, because trailing return on equity of 36.7% is far above the cost of equity. The earnings-power value at zero growth lands near $75.
The pattern is a quality retailer priced fairly to modestly cheap on its multiples but not on its assets at zero growth. The bet at $112 is that the multi-price strategy sustains the margin expansion and that free cash flow turns positive as the reinvestment cycle matures, not that the shares are cheap on cash the business is currently generating, which it is not.
Catalysts
First-quarter 2026 results, reported May 29, were the most recent catalyst. Net sales rose 7.2% to $4.97 billion on a 3.5% comparable-store increase, gross margin expanded 120 basis points, and adjusted EPS jumped 38% to $1.74. The company carried $21.1 million of net transition-services income from the divested Family Dollar business. Full-year guidance was set at net sales of $20.5 billion to $20.7 billion, 3% to 4% comparable growth, and adjusted EPS of $6.70 to $7.10, with second-quarter guidance of $4.8 billion to $4.9 billion in sales and $1.00 to $1.15 adjusted EPS.
The forward catalysts center on the multi-price rollout and tariff management. The continued expansion of $3, $4, and $5 price points is the primary lever for ticket and margin, and the market is watching how renewed tariff volatility interacts with the cost base. Now operating as a focused Dollar Tree banner after the Family Dollar sale, the company can concentrate capital on store conversions and productivity. Analysts hold a Hold consensus with targets near $117. The watch items are the next quarterly comp and margin prints, the pace of multi-price adoption, the trajectory of free cash flow as reinvestment matures, and any escalation in tariffs on imported merchandise.
Peer Cohorts (Per Segment, With Filing Citations)
Dollar Tree (reported)
- DG (DOLLAR GENERAL CORP)
- (no filing in the citation store)
- TGT (TARGET CORPORATION)
- (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)
- BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
- (no filing in the citation store)
- PSMT (PriceSmart, 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.