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News - October 22, 2020

Dollar Tree Stock Looks Attractive At $95 – Trefis

Dollar Tree’s stock (NASDAQ: DLTR) is up only slightly to around $95 levels year-to-date, compared to a 6% growth for the broader S&P 500. While Dollar Tree has underperformed the broader markets, we believe it has the potential to grow. This is taking into account the 9% year-over-year (y-o-y) growth in the retailer’s revenues so far in 2020. Dollar Tree, which also owns Family Dollar, specializes in selling $1 items like toys, books, party supplies, and general discount items. We believe the company could continue to benefit from the recessionary environment given that the demand for inexpensive household products will likely remain strong in the coming quarters (which is already helping the struggling Family Dollar store). Dollar Tree’s stock declined by around 12% since the end of 2017. Our dashboard, ‘What Factors Drove -12% Change In Dollar Tree Between 2017 And Now? provides the key numbers behind our thinking, and we explain more below.

Dollar Tree’s stock lost around 12% over the past two years, primarily due to a 52% decline in earnings, partially offset by modest revenue growth of 6%. An almost 55% fall in net income margin from 7.7% in 2017 to 3.5% in 2019, led to the decline in earnings per share. A global helium shortage, higher freight and distribution costs, and higher sales of low-margin goods weighed on the company’s profits during this period. Dollar Tree has been amidst a years-long
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