Dollar Tree stock seems to be a solid long-term play
Dollar Tree, Inc. (NASDAQ:DLTR) is an American chain of discount variety stores. The company operates over 15,000 stores across 48 U.S. states and five Canadian provinces. Its stores run under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.
Last week the company announced plans to report its first-quarter earnings on Wednesday, March 3, before the market opens. Analysts project DLTR to report an earnings per share (EPS) of $2.11 for its upcoming earnings report. In the last four quarters, Dollar Tree has managed to outperform earnings expectations on all reports.
For the first quarter of 2020, Dollar Tree stock beat analysts’ expectations by a margin of $0.04 and reported earnings of $1.79 per share. For the second quarter of 2020, DLTR decreased its EPS to $1.04 and still managed to outperform estimates by a margin of $0.19. For the third quarter of 2020, DLTR increased its EPS to $1.10 and beat expectations by $0.18. In its most recent quarterly earnings, Dollar Tree stock increased its earnings to $1.39 per share and beat earnings expectations by a margin of $0.24.
Looking beyond earnings, Dollar Tree stock has shown some relatively modest growth over the past year. DLTR stock price is up about 14% over the past 12 months, with added support from the 160-day moving average cradling the equity since June. Dollar Tree stock has also increased more than 60% from its five-year low of $60.20.
From a fundamental point of view, Dollar Tree stock appears to be mixed bag that comes with a handful of both positives and negatives for potential investors. Although its revenue growth rate isn’t extraordinary, Dollar Tree has maintained consistent top-line growth in recent years. Over the past 12 months, DLTR grew revenues by $1.4 billion, bringing its total to just under $24 billion.
Where things get a bit messier is on the bottom line. Dollar Tree has struggled to grow its net income on a year-to-year basis, with its annual profits often fluctuating. Nonetheless, the company managed to increase its net income by more than $130 million in the last 12 months. The biggest issue at the moment for Dollar Tree stock is its high price-earnings ratio of 24.98. However, with DLTR expected to recover on the earning front, its forward price-earnings ratio of 17.15 is a more realistic indicator of its value. Overall, investors can expect some modest long-term gains through buying into DLTR.
