Market Overview

Dollar General and Dollar Tree to Open Near 52-Week Highs

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Yesterday, the day that the 99 Cents Only Stores (NYSE: NDN) agree to be taken private, competitor discount variety stores Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR) reached new 52-week highs of $39.40 and $80.99 per share, respectively.

Dollar General boosted its sales forecast and its shares were purchased by Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) in the second quarter. The company also launched an e-commerce site this summer. The Goodlettsville, Tenn.-based retailer has about 9,500 stores in 35 states offering such things as prepackaged foods, seasonal items and personal care items. Founded in 1939, Dollar General now has a market cap of $13.1 billion.

The price-to-earnings ratio is higher than the industry average, but so is its operating margin. The long-term EPS growth forecast is 16.5%. Twelve of 18 analysts consider it a Buy of Strong Buy; none rate it a Sell. The share price is almost 23% higher than six months ago. The stock has outperformed competitors Family Dollar (NYSE: FDO) and Walmart (NYSE: WMT) over that time.

Dollar Tree's board recently approved a plan to repurchase $1.5 billion of its common shares. Revenue is projected to grow more than 10% in the current quarter and nearly 12% for the full year. Chesapeake, Va.-based Dollar Tree operates more than 4,000 stores under various banners throughout the U.S. and in Canada. Its market cap is $9.6 billion. It was founded in 1986.

Earnings per share are anticipated to grow 17.3% over the next five years and the return on equity is 30.4%. Its operating margin is also higher than the industry average. Eleven of 19 analysts rate the stock a Buy or Strong Buy. The share price is more than 43% higher than six months ago. Over that time, the stock has also outperformed Dollar General and the 99 Cents Only Stores.

Action Items:

Bullish: Traders interested in exchange traded funds holding Dollar Tree might want to consider the following trades:

  • iShares S&P MidCap 400 Growth Index (NYSE: IJK): up more than 11% in the past week
  • iShares S&P MidCap 400 Index (NYSE: IJH): up more than 11% in the past week
  • SPDR S&P MidCap 400 (NYSE: MDY): up more than 11% in the past week

Bearish: Or traders might want to consider this alternative position:

  • ProShares Short MidCap400 (NYSE: MYY): up more than 12% in the past quarter

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: 52-Week Highs 99 cents only stores Berkshire Hathaway dollar generalLong Ideas Short Ideas Pre-Market Outlook Trading Ideas

 

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