The Best-Positioned Retailer For These Dismal Economic Times

| About: Dollar General (DG)
This article is now exclusive for PRO subscribers.

The country is going through extremely challenging times. The nation is staging the poorest recovery from a deep recession in its history and, three years after this contraction officially ended, both the welfare and food stamp rolls continue to grow amid anemic economic and job growth. Perhaps no domestic retailer is better positioned to take advantage of these discouraging trends and this dismal environment than Dollar General (DG,) which reported another stellar quarter this morning.

Here are the key highlights from Dollar General's earnings report:

  • The company reported earnings of 69 cents a share, five cents a share better than the 64 cents a share consensus.
  • It added another $500 million to its stock repurchase program.
  • Same-store sales rose more than 5% and overall revenue increased greater than 10% year over year.
  • It raised its full-year guidance to $2.77 to $2.85 a share, up from its June forecast of $2.68 to $2.78 a share.

According to the business description from Yahoo Finance:

Dollar General Corporation operates as a discount retailer primarily in the southern, southwestern, midwestern, and eastern United States. The company provides paper and cleaning products, including paper towels, bath tissues, paper dinnerware, trash and storage bags, laundry, and other home cleaning supplies; packaged food and perishables comprising cereals, canned soups and vegetables, sugar, flour, milk, eggs, and bread; beverages and snacks, such as candies, cookies, crackers, salty snacks, and carbonated beverages; over-the-counter medicines and personal care products, such as soap, body wash, shampoo, dental hygiene, and foot care products; and pet supplies and pet food products.

Here are three additional reasons why Dollar General is still a good pickup for growth investors at $51 a share:

  1. Despite its double-digit revenue growth, the stock sells at a reasonable 15 times forward earnings and has a five-year projected PEG of 1.
  2. The company is consistently posting higher same-sales growth than competitors Wal-Mart (NYSE:WMT) and Dollar Tree (NASDAQ:DLTR), which have both posted growth of just over 2% over the same period.
  3. The median analysts' price target on the stock is $60 a share. (Look for this target to move up in the following weeks based on the latest earnings report and guidance.)

Disclosure: I am long DG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.