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On Wednesday, UBS analysts raised the price target for Dollar General stock (NYSE: NYSE:DG) to $128 from $120, while maintaining a Buy rating. The stock, which has surged 15% in the past week and 44% over the last six months, received this adjustment as Dollar General shows signs of accelerating comparable growth and robust operating income and earnings per share (EPS) growth.
The analysts noted that Dollar General’s recent performance has shifted the conversation from recovery potential to whether the company is under-earning its long-term potential. Despite absorbing significant incremental incentive compensation, Dollar General has managed to maintain healthy growth metrics. According to InvestingPro, the company shows several positive indicators, with 8+ additional ProTips available to subscribers.
Dollar General has barely adjusted its full-year guidance, providing room for a potential upward revision in EPS estimates. This potential revision could drive a positive cycle for the company’s stock. Analysts are considering what the appropriate valuation multiple should be, given the stock’s historical trading range of 12x to 22x over the past decade.
UBS analysts expressed a belief that Dollar General might be under-earning its potential, suggesting the stock should trade at a favorable valuation as it returns to a normalized earnings rate, estimated to be in the 10-15% range over the next few years. The company has guided towards an operating margin of 6-7% by 2028-2029, which analysts now find credible, further supporting their positive outlook on the shares.
In other recent news, Dollar General has reported strong financial results for the first quarter of 2025, showing significant improvements in earnings per share and revenue. Analysts from various firms have responded positively, with BMO Capital, Loop Capital, Bernstein SocGen, Raymond (NSE:RYMD) James, and Goldman Sachs all raising their price targets for the company’s stock. BMO Capital increased its target to $115, citing improved execution and strategic momentum, while Loop Capital raised its target to $110, noting better-than-expected revenue and earnings. Bernstein SocGen set a new target of $126, highlighting progress in gross margin recovery and increased comparable sales. Raymond James adjusted its target to $125, pointing out operational improvements and a successful "back-to-basics" strategy. Meanwhile, Goldman Sachs raised its target to $115, expressing confidence in Dollar General’s updated guidance for fiscal year 2025. Analysts have maintained varied ratings, with BMO Capital and Loop Capital holding Market Perform and Hold ratings, respectively, while Bernstein SocGen, Raymond James, and Goldman Sachs maintain Outperform and Buy ratings. These recent developments underscore the positive trajectory of Dollar General’s financial and operational performance.
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