Making A Fortune With A Dollar: Trading Dollar General's Earnings

Dollar General DG is set to report earnings tomorrow before the bell, and with investors like Bill Ackman, and Nelson Peltz in the space in Family Dollar FDO, perhaps it is time that investors look at the ever growing dollar store space with the industry leader. The company is set to report earnings before the bell, and Wall Street will be looking for earnings of 50 cents per share on revenues of $3.42 billion. This is up nearly 20% from last year, when the company reported earnings of 42 cents per share on $3.11 billion in revenues. Revenues would have grown nearly 10% if the company can meet or exceed these estimates. Last week at the Ira Sohn Conference, Ackman disclosed a stake in Family Dollar, saying he saw significant value in the name. In the presentation, Ackman praised Dollar General, as the company was cleaned up by its prior owners KKR, and then spun back to the public markets. Ackman said that Dollar General has higher margins, sales per square foot, and faster growth. With Ackman and Peltz in the space, obviously there is value being seen here, and investors would be wise to consider initiating or adding to positions in Dollar General, or perhaps one of its competitors, such as Family Dollar. Both companies trade around 13 times 2012 earnings. Family Dollar recently reported record second quarter earnings, and if this is any indication, Dollar General may do the same. The company has been able to grow its earnings by 16%, and the return on equity is strong, at nearly 17%. Last week, Dollar General announced plans to expand into California, which will be a significant growth driver for the company. California is the world's eighth largest economy, and if the company can continue to to operate its successful model in this state, then Dollar General should see significant earnings growth in the years ahead. Other growth drivers for the space are online shopping, remodeling of stores, and continued store openings. Dollar General Corporation operates as a discount retailer of general merchandise in the southern, southwestern, midwestern, and eastern United States.