Goldman Sachs Adds Dollar General To Conviction Buy List, Sees 18% Return Potential

In a report published Tuesday, Goldman Sachs analysts maintained a Buy rating on Dollar General Corp DG, while raising the price target from $85 to $87. The company has been added to the Conviction Buy list. Dollar General's growth prospects continue to be driven by the company's robust fundamentals, its consistent high ROIC business model and an attractive valuation. The company reported better-than-expected 1Q results and performed better than its retail peers like Ross Stores Inc ROST, TJX Companies Inc TJX and Dollar Tree Inc DLTR. In the report Goldman Sachs noted, "We expect earnings beats to act as a catalyst for shares as fundamentals inflect." There is 18 percent upside to the 12-month price target. Referring to investor concerns regarding potential port issues, deflation/inflation impacts and wage pressure concerns, the analysts mentioned, "We note DG has significantly lower import exposure versus DLTR, DG sells essentially no produce and limited dairy, and we have already factored wage pressure into our estimates, as we embed less leverage in the out years to incorporate potential wage hikes. " "Furthermore, our numbers do not factor in potential upside from consolidation in the dollar store industry," the analysts added.