DG - Embedded Expectations Analysis - 2020 11 20
Dollar General Corporation (DG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 23.9x Uniform P/E. At these levels, the market has expectations for profitability to remain stable, but management may have concerns about their non-consumable initiative, supply chain changes, and cost reduction opportunitiesSpecifically, management may lack confidence in their ability to sustain non-consumable business growth and replicate the margin benefits of their non-consumable initiatives (NCI). In addition, they may have concerns about potential deterioration of the macroeconomic landscape as well as greater than expected legal costs. Furthermore, management may lack confidence in their ability to improve the supply chain, capitalize on cost reduction opportunities, and retain customers throughout the pandemic. Moreover, they may be exaggerating the consumer satisfaction of their BOPIS offering. Finally, they may lack confidence in their ability to enhance their convenience proposition with self-checkout
Dollar General is a discount retailer. The company's consumables products includes paper and cleaning products, packaged food, perishables, snacks, health and beauty, pet, and tobacco products. The company's seasonal products include decorations, toys, batteries, small electronics, greeting cards, stationery, prepaid phones and accessories, gardening supplies, hardware, automotive and home office supplies. The company's home products include kitchen supplies, cookware, small appliances, light bulbs, storage containers, frames, candles, craft supplies and kitchen, bed and bath soft goods. The company's apparel includes casual everyday apparel, as well as socks, underwear, disposable diapers, shoes and accessories.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
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