Co. Spotlight - Dollar Tree: |  - Co. Spotlights available via RSS feed
| Where Money Grows? |  
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| | DLTR | $34.03 | The Good: Increased traffic, expanded product mix..
The Bad: Stock has rocketed over the past year.
The Beautiful: The economy works in the company's favor. | P/E | 14 | | PSR | 0.7 | | ROE | 20.6% | | Debt/Eq. | 0.21 | | Div. Yield | 0% |
February 11, 2009 - Dollar Tree, Inc. (DLTR-NASDAQ) through its subsidiaries, operates discount variety stores that offer merchandise at the fixed price of $1.00 in the United States. The company operates stores under the names of Dollar Tree, Deal$, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, basic health, and beauty care; household consumables, such as paper, plastics, and household chemicals, as well as frozen and refrigerated food; variety merchandise, which includes toys, durable house wares, gifts, fashion health and beauty care, party goods, greeting cards, apparel, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise, as well as summer toys, and lawn and garden merchandise.
As of May 3, 2008, Dollar Tree operated 3,474 discount variety retail stores in 48 states. The company was founded in 1986 and is headquartered in Chesapeake, Virginia.
This stock traded at $20.70 early in 2008, dipping down from $46, a new all-time high (split adjusted) reached in the middle of 2007. Then it rallied to $44.30 late last year, only to pull back to its current level. Can it reach the old high or is it set to keep going lower? Here's the story.
Analysts see only stronger sales and profits. For 2009, the average earnings estimate for 9 analysts is $2.50 a share (fiscal year ends in January). That's up from $2.09 in 2008. Next year, they see $2.73. For the past 5 years, earnings have increased, on average, 8.133% per year. For the next 5, look for 14% per year, on average. Sales should hit $5.01 billion in 2010. They were $3.393 billion in 2005.
In the third quarter (ended in October), sales were higher by 12% vs the same quarter in 2007. During the same period, S G & A (sales, general and administrative) expenses declined due to better cost controls and lower advertising. Earnings jumped by 24% in the quarter compared to the same quarter in the previous year.
Expect more of the same as the economy drives consumers to the best deals they can find. Saving money is the highest priority, and that's what Dollar Tree is all about. Stores carry more merchandise now with added health and beauty care products, household cleaning supplies, paper goods, and food and beverages. There's been a noticeable increase in traffic since the new products were put on the shelves. Helping the third and fourth quarter numbers are the higher-margined, seasonal items, ones for back-to school, Halloween and Christmas.
The numbers: Market cap is $3.11 billion. Forward P/E is 12.6. Price to Book is 2.78. Operating margin for the last 12 months was 7.81% and Profit margin was 4.81%. There's $78.6 million in cash, putting the Current ratio at 2.332. Book Value is $12.58. Beta is a defensive .38. There is no dividend. There are 90.62 million shares outstanding. Insiders own 3.03% of them.
Dollar Tree stock should do well in these difficult times. With more products on the shelves, higher traffic, and consumers looking for the best prices, it's enjoying the sweet spot of retailing. But the stock's valuation reflects a lot of this news, and investors who like the story may want to wait for one of those price drops the stock has had in the last year. Of course, the company may surprise analysts with better than expected earnings, and those drops may be history.
Company Web site: www.dollartree.com - Ted Allrich |
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