Tight economies continue to drive consumers into discount chains this year. Dollar General Corporation (NYSE:DG) has been benefiting from this shift. Consequently, the stock has maintained an upside, with 6.71% gains year-to-date. Consequently, DG has outperformed the market in all respects.
It is worth noting that no matter how good a stock is, high valuations are a deterrence to investors. As such, you may be worried if investing in a stock that has stayed bullish for some time makes sense. A stock will be considered overvalued if its current price is higher than the fair price and vice versa.
Zacks Investment Research places DG PEG ratio, a key valuation indicator, at 2.31. The Retail and Discount Stores industry carries a PEG ratio of 2.17. That suggests that DG is slightly overvalued compared to the industry. However, the stock has a Value Style Score of B and a Zacks Rank #3 rating, a hold. The company’s earnings revisions and guidance reinforce a favourable view of DG.
Dollar General reports earnings on December 1 before the market open. Investors expect it to report $2.54 quarterly earnings per share, a year-over-year increase of 22.12%. The company’s quarterly revenues are expected at $9.43 billion or £8 billion, up 10.65%. The earnings come at the back of a strong year on budget shopping. Guggenheim analysts expect this shopping trend to continue in a potential recession year 2023. TipRanks rates the strong a “strong buy,” with a price target of $278.83. The stock trades at $250 currently.
A technical outlook shows DG on a clear uptrend of higher highs and higher lows. The stock is maintaining a surge along an ascending trendline. The RSI is above the midpoint, suggesting that buyers are many.
DG carries a lot of value and stability in an overheating economy. With discount shopping remaining steady, the stock will continue to soar. Investors should consider buying the stock when it touches or nears the ascending trendline.
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