Over the past six months, Dollar General’s shares (currently trading at $126.48) have posted a disappointing 12.7% loss, well below the S&P 500’s 11.8% gain. This might have investors contemplating their next move.
Is now the time to buy Dollar General, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Dollar General Not Exciting?
Even though the stock has become cheaper, we’re cautious about Dollar General. Here are three reasons you should be careful with DG, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Dollar General grew its sales at a sluggish 3.9% compounded annual growth rate. This was below our standard for the consumer retail sector.
2. Low Gross Margin Reveals Weak Structural Profitability
We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.
Dollar General has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 30.3% gross margin over the last two years. That means Dollar General paid its suppliers a lot of money ($69.66 for every $100 in revenue) to run its business.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Dollar General, its EPS declined by 12.6% annually over the last three years while its revenue grew by 3.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Dollar General isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 16.9× forward P/E (or $126.48 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better investments elsewhere. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than Dollar General
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
