Dollar Tree Inc Valuation – March 2019 #DLTR

Company Profile (excerpt from Reuters): Dollar Tree, Inc., incorporated on February 22, 2008, is an operator of discount variety stores. As of January 28, 2017, the Company operated 14,334 stores in 48 states and the District of Columbia, and five Canadian provinces. The Company’s segments include Dollar Tree and Family Dollar. The Dollar Tree segment is the operator of discount variety stores offering merchandise at a fixed price. The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of merchandise in neighborhood stores. The Company’s stores operate under the names of Dollar Tree, Family Dollar and Dollar Tree Canada. As of January 28, 2017, the Dollar Tree segment included 6,360 stores operating under the Dollar Tree and Dollar Tree Canada brands, 11 distribution centers in the United States and two in Canada and a Store Support Center in Chesapeake, Virginia. The Family Dollar segment consists of its operations under the Family Dollar brand, 11 distribution centers and a Store Support Center in Matthews, North Carolina. As of January 28, 2017, the Company offered 7,100 items in its stores. The Company offers a range of everyday basic products, and supplements these basic, everyday items with seasonal, closeout and promotional merchandise.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DLTR – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $24,548,986,071 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.22 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 220.13% Pass
6. Moderate PEmg Ratio PEmg < 20 23.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.10 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.22 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.44
MG Growth Estimate 10.62%
MG Value $132.06
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $64.38
MG Value based on 0% Growth $37.74
Market Implied Growth Rate 7.37%
Current Price $103.16
% of Intrinsic Value 78.11%

Dollar Tree, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.6 in 2015 to an estimated $4.44 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 7.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Dollar Tree, Inc. revealed the company was trading above its Graham Number of $53.48. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 23.23, which was below the industry average of 27.69, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.58.

Dollar Tree, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.58
Graham Number $53.48
PEmg 23.23
Current Ratio 2.22
PB Ratio 3.10
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $4,749,500,000
Total Current Liabilities $2,135,700,000
Long-Term Debt $5,043,800,000
Total Assets $16,649,300,000
Intangible Assets $8,442,800,000
Total Liabilities $8,706,200,000
Shares Outstanding (Diluted Average) 238,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.20
Jan2018 $7.21
Jan2017 $3.78
Jan2016 $1.26
Jan2015 $2.90
Jan2014 $2.72
Jan2013 $2.68
Jan2012 $2.01
Jan2011 $1.55
Jan2010 $1.19
Jan2009 $0.84
Jan2008 $0.70
Jan2007 $0.62
Jan2006 $0.53
Jan2005 $0.53
Jan2004 $0.51
Dec2002 $0.45
Dec2001 $0.36
Dec2000 $0.36
Dec1999 $0.31
Dec1998 $0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.44
Jan2018 $4.23
Jan2017 $2.72
Jan2016 $2.23
Jan2015 $2.60
Jan2014 $2.31
Jan2013 $1.95
Jan2012 $1.48
Jan2011 $1.14
Jan2010 $0.88
Jan2009 $0.70
Jan2008 $0.61
Jan2007 $0.55
Jan2006 $0.51
Jan2005 $0.47
Jan2004 $0.43
Dec2002 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Dollar Tree Inc Valuation – May 2018 $DLTR
Dollar Tree Inc Valuation – February 2017 $DLTR
Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR
5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Retail Industry – August 2015

Other ModernGraham posts about related companies

TJX Companies Inc Valuation – February 2019 $TJX
Tractor Supply Co Valuation – February 2019 $TSCO
Tapestry Inc Valuation – February 2019 $TPR
Dollar General Corp Valuation – February 2019 $DG
Tiffany & Co Valuation – February 2019 $TIF
Best Buy Co Inc Valuation – February 2019 $BBY
Macy’s Inc Valuation – January 2019 $M
Ross Stores Inc Valuation – January 2019 $ROST
Walgreens Boots Alliance Inc Valuation – December 2018 $WBA
Nordstrom Inc Valuation – December 2018 $JWN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Dollar Tree Inc Valuation – May 2018 $DLTR

Company Profile (excerpt from Reuters): Dollar Tree, Inc., incorporated on February 22, 2008, is an operator of discount variety stores. As of January 28, 2017, the Company operated 14,334 stores in 48 states and the District of Columbia, and five Canadian provinces. The Company’s segments include Dollar Tree and Family Dollar. The Dollar Tree segment is the operator of discount variety stores offering merchandise at a fixed price. The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of merchandise in neighborhood stores. The Company’s stores operate under the names of Dollar Tree, Family Dollar and Dollar Tree Canada. As of January 28, 2017, the Dollar Tree segment included 6,360 stores operating under the Dollar Tree and Dollar Tree Canada brands, 11 distribution centers in the United States and two in Canada and a Store Support Center in Chesapeake, Virginia. The Family Dollar segment consists of its operations under the Family Dollar brand, 11 distribution centers and a Store Support Center in Matthews, North Carolina. As of January 28, 2017, the Company offered 7,100 items in its stores. The Company offers a range of everyday basic products, and supplements these basic, everyday items with seasonal, closeout and promotional merchandise.

DLTR Chart

DLTR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DLTR – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $22,656,970,683 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 246.05% Pass
6. Moderate PEmg Ratio PEmg < 20 19.65 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.16 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.77 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.85
MG Growth Estimate 12.99%
MG Value $167.21
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $70.33
MG Value based on 0% Growth $41.23
Market Implied Growth Rate 5.57%
Current Price $95.29
% of Intrinsic Value 56.99%

Dollar Tree, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.6 in 2015 to an estimated $4.85 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Dollar Tree, Inc. revealed the company was trading above its Graham Number of $60.76. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 19.65, which was below the industry average of 36.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.2.

Dollar Tree, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$19.20
Graham Number $60.76
PEmg 19.65
Current Ratio 1.60
PB Ratio 3.16
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $4,576,300,000
Total Current Liabilities $2,859,100,000
Long-Term Debt $4,762,100,000
Total Assets $16,332,800,000
Intangible Assets $8,505,300,000
Total Liabilities $9,150,500,000
Shares Outstanding (Diluted Average) 238,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.43
Jan2018 $7.21
Jan2017 $3.78
Jan2016 $1.26
Jan2015 $2.90
Jan2014 $2.72
Jan2013 $2.68
Jan2012 $2.01
Jan2011 $1.55
Jan2010 $1.19
Jan2009 $0.84
Jan2008 $0.70
Jan2007 $0.62
Jan2006 $0.53
Jan2005 $0.53
Jan2004 $0.51
Dec2002 $0.45
Dec2001 $0.36
Dec2000 $0.36
Dec1999 $0.31
Dec1998 $0.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.85
Jan2018 $4.23
Jan2017 $2.72
Jan2016 $2.23
Jan2015 $2.60
Jan2014 $2.31
Jan2013 $1.95
Jan2012 $1.48
Jan2011 $1.14
Jan2010 $0.88
Jan2009 $0.70
Jan2008 $0.61
Jan2007 $0.55
Jan2006 $0.51
Jan2005 $0.47
Jan2004 $0.43
Dec2002 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Dollar Tree Inc Valuation – February 2017 $DLTR
Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR
5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Retail Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15

Other ModernGraham posts about related companies

TJX Companies Inc Valuation – May 2018 $TJX
Tractor Supply Co Valuation – April 2018 $TSCO
Tapestry Inc Valuation – April 2018 $TPR
Dollar General Corp Valuation – April 2018 $DG
Tiffany & Co. Valuation – April 2018 $TIF
Best Buy Co Inc Valuation – April 2018 $BBY
Macy’s Inc Valuation – April 2018 $M
Walgreens Boots Alliance Inc Valuation – March 2018 $WBA
Bed Bath & Beyond Inc Valuation – March 2018 $BBBY
Ross Stores Inc Valuation – March 2018 $ROST

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Dollar Tree Inc Valuation – February 2017 $DLTR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Dollar Tree Inc (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. is an operator of discount variety stores. The Company operates approximately 13,851 discount variety retail stores. The Company’s segments include Dollar Tree and Family Dollar. The Dollar Tree segment operates discount variety stores offering merchandise at a fixed price. The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of merchandise in neighborhood stores. Its stores operate under the names of Dollar Tree, Family Dollar, Dollar Tree Canada, Deals and Dollar Tree Deals. The Dollar Tree segment includes its operations under the Dollar Tree, Dollar Tree Canada, Deals and Dollar Tree Deals brands, over 10 distribution centers in the United States and over two in Canada, and a Store Support Center in Chesapeake, Virginia. The Family Dollar segment consists of its operations under the Family Dollar brand, over 11 distribution centers and a Store Support Center in Matthews, North Carolina.

DLTR Chart

DLTR data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DLTR – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,967,647,999 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.03 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 187.71% Pass
6. Moderate PEmg Ratio PEmg < 20 28.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.03 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.14 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.68
MG Growth Estimate 5.61%
MG Value $52.92
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $38.92
MG Value based on 0% Growth $22.81
Market Implied Growth Rate 9.91%
Current Price $76.02
% of Intrinsic Value 143.65%

Dollar Tree, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.95 in 2013 to an estimated $2.68 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Dollar Tree, Inc. revealed the company was trading above its Graham Number of $42.08. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 28.32, which was below the industry average of 50.09, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.72.

Dollar Tree, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.72
Graham Number $42.08
PEmg 28.32
Current Ratio 2.03
PB Ratio 3.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2016
Total Current Assets $4,342,400,000
Total Current Liabilities $2,134,200,000
Long-Term Debt $6,938,000,000
Total Assets $16,195,000,000
Intangible Assets $8,621,900,000
Total Liabilities $11,147,300,000
Shares Outstanding (Diluted Average) 236,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.68
Jan2016 $1.26
Jan2015 $2.90
Jan2014 $2.72
Jan2013 $2.68
Jan2012 $2.01
Jan2011 $1.55
Jan2010 $1.19
Jan2009 $0.84
Jan2008 $0.70
Jan2007 $0.62
Jan2006 $0.53
Jan2005 $0.53
Jan2004 $0.51
Dec2002 $0.45
Dec2001 $0.36
Dec2000 $0.36
Dec1999 $0.31
Dec1998 $0.24
Dec1997 $0.17
Dec1996 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.68
Jan2016 $2.23
Jan2015 $2.60
Jan2014 $2.31
Jan2013 $1.95
Jan2012 $1.48
Jan2011 $1.14
Jan2010 $0.88
Jan2009 $0.70
Jan2008 $0.61
Jan2007 $0.55
Jan2006 $0.51
Jan2005 $0.47
Jan2004 $0.43
Dec2002 $0.38
Dec2001 $0.32
Dec2000 $0.28

Recommended Reading:

Other ModernGraham posts about the company

Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR
5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Retail Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
Dollar Tree Inc. Analysis – July 2015 Update $DLTR

Other ModernGraham posts about related companies

Staples Inc Valuation – February 2017 $SPLS
Stein Mart Inc Valuation – Initial Coverage $SMRT
J C Penney Company Inc Valuation – Initial Coverage $JCP
TJX Companies Inc Valuation – December 2016 $TJX
Shoe Carnival Inc Valuation – Initial Coverage $SCVL
Aaron’s Inc Valuation – November 2016 $AAN
Tractor Supply Company Valuation – August 2016 $TSCO
Fossil Group Inc Valuation – August 2016 $FOSL
Target Corp Valuation – August 2016 $TGT
TJX Companies Inc Valuation – August 2016 $TJX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Dollar Tree Stores Inc. Valuation – October 2015 Update $DLTR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Dollar Tree Stores Inc. (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price of $ 1.00. The Company offers a selection of everyday basic products and also supplements these basic, everyday items with seasonal, closeout and promotional merchandise. As of July 06, 2015, the Company operated more than 13,600 stores across 48 states and five Canadian provinces. Its stores operate under the brands of Dollar Tree, Dollar Tree Canada, Deals and Family Dollar. Dollar Tree’s consumable merchandise includes candy and food health and beauty care and everyday consumables, such as paper and chemicals, and in select stores frozen and refrigerated food. The Company’s variety merchandise includes toys, durable housewares, gifts, party goods, greeting cards, softlines and other items. Its seasonal goods include Valentine’s Day, Easter, Halloween and Christmas merchandise.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of DLTR – October 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,451,458,200 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.18 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 210.62% Pass
6. Moderate PEmg Ratio PEmg < 20 28.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.27 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.18 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DLTR value Chart October 2015

EPSmg $2.17
MG Growth Estimate 6.99%
MG Value $48.76
Opinion Overvalued
MG Value based on 3% Growth $31.45
MG Value based on 0% Growth $18.43
Market Implied Growth Rate 9.98%
Current Price $61.72
% of Intrinsic Value 126.58%

Dollar Tree Stores Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is concerned by the level of debt relative to the net current assets and the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.48 in 2012 to an estimated $2.17 for 2016.  This level of demonstrated earnings growth does not support the market’s implied estimate of 9.98% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Dollar Tree Stores Inc. (DLTR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

DLTR Charts October 2015

Net Current Asset Value (NCAV) -$37.30
Graham Number $20.47
PEmg 28.46
Current Ratio 2.18
PB Ratio 3.27
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $4,524,700,000
Total Current Liabilities $2,073,300,000
Long-Term Debt $8,265,500,000
Total Assets $16,565,100,000
Intangible Assets $8,709,900,000
Total Liabilities $12,518,100,000
Shares Outstanding (Diluted Average) 214,300,000

Earnings Per Share History

Next Fiscal Year Estimate $1.08
Jan15 $2.90
Jan14 $2.72
Jan13 $2.68
Jan12 $2.01
Jan11 $1.55
Jan10 $1.19
Jan09 $0.84
Jan08 $0.70
Jan07 $0.62
Jan06 $0.53
Jan05 $0.53
Jan04 $0.51
Dec02 $0.45
Dec01 $0.36
Dec00 $0.36
Dec99 $0.31
Dec98 $0.24
Dec97 $0.17
Dec96 $0.12
Dec95 $0.08

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.17
Jan15 $2.60
Jan14 $2.31
Jan13 $1.95
Jan12 $1.48
Jan11 $1.14
Jan10 $0.88
Jan09 $0.70
Jan08 $0.61
Jan07 $0.55
Jan06 $0.51
Jan05 $0.47
Jan04 $0.43
Dec02 $0.38
Dec01 $0.32
Dec00 $0.28
Dec99 $0.22

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – October 2015
The Best Companies of the Retail Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
Dollar Tree Inc. Analysis – July 2015 Update $DLTR
21 Companies in the Spotlight This Week – 5/9/15

Other ModernGraham posts about related companies

Tiffany and Company Valuation – October 2015 Update $TIF
Urban Outfitters Inc. Analysis – October 2015 Update $URBN
Staples Inc. Analysis – September 2015 Update $SPLS
Fossil Group Inc. Analysis – September 2015 Update $FOSL
Ross Stores Inc. Analysis – August 2015 Update $ROST
The Best Companies of the Retail Industry – August 2015
Bed Bath & Beyond Inc. Analysis – August 2015 Update $BBBY
Ann Inc. Analysis – Initial Coverage $ANN
Kohl’s Corporation Analysis – August 2015 Update $KSS
Aaron’s Inc. Analysis – Initial Coverage $AAN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Dollar Tree Inc. Analysis – July 2015 Update $DLTR

220px-Dollar_Tree_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Dollar Tree Inc. (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price of $ 1.00. The Company offers a selection of everyday basic products and also supplements these basic, everyday items with seasonal, closeout and promotional merchandise. As of July 06, 2015, the Company operated more than 13,600 stores across 48 states and five Canadian provinces. Its stores operate under the brands of Dollar Tree, Dollar Tree Canada, Deals and Family Dollar. Dollar Tree’s consumable merchandise includes candy and food health and beauty care and everyday consumables, such as paper and chemicals, and in select stores frozen and refrigerated food. The Company’s variety merchandise includes toys, durable housewares, gifts, party goods, greeting cards, softlines and other items. Its seasonal goods include Valentine’s Day, Easter, Halloween and Christmas merchandise.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $79.10
MG Value $102.00
MG Opinion Fairly Valued
Value Based on 3% Growth $41.11
Value Based on 0% Growth $24.10
Market Implied Growth Rate 9.70%
Net Current Asset Value (NCAV) $1.63
PEmg 27.90
Current Ratio 9.20
PB Ratio 8.76

Balance Sheet – April 2015

Current Assets $9,336,000,000
Current Liabilities $1,015,000,000
Total Debt $7,820,000,000
Total Assets $10,869,000,000
Intangible Assets $166,000,000
Total Liabilities $8,998,000,000
Outstanding Shares 207,100,000

Earnings Per Share

2016 (estimate) $3.08
2015 $2.90
2014 $2.72
2013 $2.68
2012 $2.01
2011 $1.55
2010 $1.19
2009 $0.84
2008 $0.70
2007 $0.62
2006 $0.53

Earnings Per Share – ModernGraham

2016 (estimate) $2.84
2015 $2.60
2014 $2.31
2013 $1.95
2012 $1.48
2011 $1.14

Dividend History
Dollar Tree does not pay a dividend.

Free Cash Flow

Conclusion:

Dollar Tree Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends, along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.48 in 2012 to an estimated $2.84 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 9.7% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Dollar Tree Inc. (DLTR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Dollar Tree Inc. Quarterly Valuation – May 2015 $DLTR

220px-Dollar_Tree_logoDollar Tree (NASDAQ:DLTR) should attract all Enterprising Investors, particularly due to the company’s stable earnings growth over the last few years. That said, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to determine a potential investment’s merits. Here’s an updated look at how the company fares in the ModernGraham valuation model.

This model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

DLTR Chart

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests, or be suitable for a Defensive Investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings Growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $80.57
MG Value $100.07
MG Opinion Fairly Valued
Value Based on 3% Growth $37.69
Value Based on 0% Growth $22.09
Market Implied Growth Rate 11.25%
Net Current Asset Value (NCAV) $1.03
PEmg 31.00
Current Ratio 2.31
PB Ratio 9.34


Balance Sheet – December 2014

Current Assets $1,995,000,000
Current Liabilities $862,000,000
Total Debt $757,000,000
Total Assets $3,567,000,000
Intangible Assets $166,000,000
Total Liabilities $1,782,000,000
Outstanding Shares 207,000,000


Earnings Per Share

2015 $2.90
2014 $2.72
2013 $2.68
2012 $2.01
2011 $1.55
2010 $1.19
2009 $0.84
2008 $0.70
2007 $0.62
2006 $0.53
2005 $0.53


Earnings Per Share – ModernGraham

2015 $2.60
2014 $2.31
2013 $1.95
2012 $1.48
2011 $1.14
2010 $0.88


Dividend History

Dollar Tree does not pay a dividend.

Conclusion

Dollar Tree should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios while the Enterprising Investor is only concerned by the lack of dividends. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $1.14 in 2011 to $2.60 for 2015. This level of demonstrated growth is in line with the market’s implied estimate for earnings growth of 11.25% over the next 7-10 years. The ModernGraham valuation model, therefore, returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

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Dollar Tree Inc. Quarterly Valuation – February 2015 $DLTR

220px-Dollar_Tree_logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – January 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Dollar Tree Inc. (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. is an operator of discount variety stores offering merchandise at the fixed price of $ 1.00 in United States and Canada. As of February 1, 2014, the Company operated 4,812 stores in 48 states and the District of Columbia, as well as 180 stores in Canada. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Tree Canada, Dollar Giant and Dollar Bills. In 4,778 of these stores, it sells all items for $1.00 or less in the United States and $1.25 or less in Canada. In all the stores, operating as Deal$, it sells items for $1.00 or less but also sell items for more than $1.00. The Company offers a selection of everyday basic products and also supplements these basic, everyday items with seasonal, closeout and promotional merchandise.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $71.10
MG Value $102.51
MG Opinion Undervalued
Value Based on 3% Growth $38.61
Value Based on 0% Growth $22.63
Market Implied Growth Rate 9.10%
Net Current Asset Value (NCAV) $0.06
PEmg 26.70
Current Ratio 2.07
PB Ratio 9.27

Balance Sheet – September 2014

Current Assets $1,796,000,000
Current Liabilities $867,000,000
Total Debt $757,000,000
Total Assets $3,368,000,000
Intangible Assets $169,000,000
Total Liabilities $1,783,000,000
Outstanding Shares 206,600,000

Earnings Per Share

2015 (estimate) $3.09
2014 $2.72
2013 $2.68
2012 $2.01
2011 $1.55
2010 $1.19
2009 $0.84
2008 $0.70
2007 $0.62
2006 $0.53
2005 $0.53

Earnings Per Share – ModernGraham

2015 (estimate) $2.66
2014 $2.31
2013 $1.95
2012 $1.48
2011 $1.14
2010 $0.88

Dividend History
Dollar Tree does not pay a dividend.

Conclusion:

Dollar Tree Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of dividends as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of dividends.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2011 to an estimated $2.66 for 2014.  This level of demonstrated growth is greater than the market’s implied estimate of 9.1% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Dollar Tree Inc. (DLTR) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Dollar Tree Inc. (DLTR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Dollar Tree Inc. (DLTR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Dollar Tree Inc. Quarterly Valuation – October 2014 $DLTR

logo (2)Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies to Research for the Defensive Investor – October 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Dollar Tree Inc. (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price. As of January 28, 2012, the Company operated 4,351 discount variety retail stores. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant and Dollar Bills. As of January 28, 2012, it operated 4,252 stores in 48 states and the District of Columbia, as well as 99 stores in Canada. It buys approximately 58% to 60% of its merchandise domestically and imports the remaining 40% to 42%. Its domestic purchases include basic, seasonal, closeouts and promotional merchandise. It maintains a selection of products within variety store categories. During the fiscal year ended January 28, 2012 (fiscal 2011), the Company opened 278 new stores.
DLTR Chart

DLTR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 -PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $59.84
MG Value $100.72
MG Opinion Undervalued
Value Based on 3% Growth $37.93
Value Based on 0% Growth $22.24
Market Implied Growth Rate 7.19%
Net Current Asset Value (NCAV) -$0.17
PEmg 22.87
Current Ratio 2.12
PB Ratio 8.54

Balance Sheet – July 2014

Current Assets $1,663,000,000
Current Liabilities $783,000,000
Total Debt $757,000,000
Total Assets $3,147,000,000
Intangible Assets $170,000,000
Total Liabilities $1,699,000,000
Outstanding Shares 206,600,000

Earnings Per Share

2014 (estimate) $2.95
2013 $2.72
2012 $2.68
2011 $2.01
2010 $1.55
2009 $1.19
2008 $0.84
2007 $0.70
2006 $0.62
2005 $0.53
2004 $0.53

Earnings Per Share – ModernGraham

2014 (estimate) $2.62
2013 $2.31
2012 $1.95
2011 $1.48
2010 $1.14
2009 $0.88

Dividend History
Dollar Tree does not pay a dividend.

Conclusion:

Dollar Tree is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of dividend payments and the high PEmg and PB ratios.  The Enterprising Investor’s only concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2010 to an estimated $2.62 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.19% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out previous ModernGraham valuations of Dollar Tree Inc. (DLTR) for a better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Dollar Tree Inc. (DLTR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Dollar Tree Inc. (DLTR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Dollar Tree Inc. Quarterly Valuation – July 2014 $DLTR

logo (2)Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies to Research for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Dollar Tree Inc. (DLTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Dollar Tree, Inc. (Dollar Tree) is an operator of discount variety stores offering merchandise at the fixed price. As of January 28, 2012, the Company operated 4,351 discount variety retail stores. Its stores operate under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant and Dollar Bills. As of January 28, 2012, it operated 4,252 stores in 48 states and the District of Columbia, as well as 99 stores in Canada. It buys approximately 58% to 60% of its merchandise domestically and imports the remaining 40% to 42%. Its domestic purchases include basic, seasonal, closeouts and promotional merchandise. It maintains a selection of products within variety store categories. During the fiscal year ended January 28, 2012 (fiscal 2011), the Company opened 278 new stores.
DLTR Chart

DLTR data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $54.46
MG Value $101.87
MG Opinion Undervalued
Value Based on 3% Growth $38.37
Value Based on 0% Growth $22.49
Market Implied Growth Rate 6.04%
Net Current Asset Value (NCAV) -$0.50
PEmg 20.58
Current Ratio 2.12
PB Ratio 8.55

Balance Sheet – 5/3/2014

Current Assets $1,537,000,000
Current Liabilities $724,500,000
Total Debt $757,000,000
Total Assets $2,958,000,000
Intangible Assets $169,600,000
Total Liabilities $1,640,200,000
Outstanding Shares 206,800,000

Earnings Per Share

2014 (estimate) $3.04
2013 $2.72
2012 $2.68
2011 $2.01
2010 $1.55
2009 $1.19
2008 $0.84
2007 $0.70
2006 $0.62
2005 $0.53
2004 $0.53

Earnings Per Share – ModernGraham

2014 (estimate) $2.65
2013 $2.31
2012 $1.95
2011 $1.48
2010 $1.14
2009 $0.88

Conclusion:

Dollar Tree is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of dividend payments and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is with the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities including a review of ModernGraham’s valuation of Dollar General (DG) and ModernGraham’s valuation of Family Dollar Stores (FDO).  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.14 in 2010 to an estimated $2.65 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of 6.04% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Dollar Tree Inc. (DLTR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Dollar Tree Inc. (DLTR) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Costco Wholesale Corp Valuation – March 2019 #COST

Company Profile (excerpt from Reuters): Costco Wholesale Corporation, incorporated on May 12, 1987, is engaged in the operation of membership warehouses in the United States and Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, Spain, and through its subsidiaries in Taiwan and Korea. As of August 28, 2016, the Company operated 715 warehouses across the world. The Company’s average warehouse space is approximately 144,000 square feet. The Company’s warehouses on average operate on a seven-day, 70-hour week. The Company offers merchandise in various categories, which include foods (including dry foods, packaged foods and groceries); sundries (including snack foods, candy, alcoholic and nonalcoholic beverages, and cleaning supplies); hardlines (including appliances, electronics, health and beauty aids, hardware, and garden and patio); fresh foods (including meat, produce, deli and bakery); softlines (including apparel and small appliances), and other (including gas stations and pharmacy).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COST – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $103,811,680,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.73% Pass
6. Moderate PEmg Ratio PEmg < 20 34.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.36 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.98 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.75
MG Growth Estimate 6.57%
MG Value $146.16
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $97.90
MG Value based on 0% Growth $57.39
Market Implied Growth Rate 13.23%
Current Price $236.07
% of Intrinsic Value 161.52%

Costco Wholesale Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.69 in 2015 to an estimated $6.75 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.23% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Costco Wholesale Corporation revealed the company was trading above its Graham Number of $71.28. The company pays a dividend of $2.14 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 34.96, which was above the industry average of 27.69. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.75.

Costco Wholesale Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.75
Graham Number $71.28
PEmg 34.96
Current Ratio 0.96
PB Ratio 7.36
Current Dividend $2.14
Dividend Yield 0.91%
Number of Consecutive Years of Dividend Growth 15

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Most Recent Balance Sheet Figures

Balance Sheet Information 2/1/2019
Total Current Assets $21,648,000,000
Total Current Liabilities $22,450,000,000
Long-Term Debt $4,794,000,000
Total Assets $42,799,000,000
Intangible Assets $0
Total Liabilities $28,616,000,000
Shares Outstanding (Diluted Average) 442,337,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.73
Aug2018 $7.09
Aug2017 $6.08
Aug2016 $5.33
Aug2015 $5.37
Aug2014 $4.65
Aug2013 $4.63
Aug2012 $3.89
Aug2011 $3.30
Aug2010 $2.92
Aug2009 $2.47
Aug2008 $2.89
Aug2007 $2.37
Aug2006 $2.30
Aug2005 $2.18
Aug2004 $1.85
Aug2003 $1.53
Aug2002 $1.48
Aug2001 $1.29
Aug2000 $1.35
Aug1999 $0.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.75
Aug2018 $6.08
Aug2017 $5.45
Aug2016 $5.02
Aug2015 $4.69
Aug2014 $4.20
Aug2013 $3.79
Aug2012 $3.28
Aug2011 $2.92
Aug2010 $2.68
Aug2009 $2.52
Aug2008 $2.47
Aug2007 $2.19
Aug2006 $2.02
Aug2005 $1.81
Aug2004 $1.58
Aug2003 $1.40

Recommended Reading:

Other ModernGraham posts about the company

Costco Wholesale Corp Valuation – June 2018 $COST
Costco Wholesale Corp Valuation – September 2017 $COST
Costco Wholesale Corp Valuation – July 2016 $COST
58 Companies in the Spotlight This Week – 1/31/15
Costco Wholesale Corporation Annual Valuation – 2015 $COST

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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