In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. In this article, we will conduct a comprehensive industry comparison, evaluating Dollar Tree DLTR against its key competitors in the Food & Staples Retailing industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company's performance within the industry.
Dollar Tree Background
Dollar Tree operates discount stores across the United States and Canada, with over 8,100 shops under its namesake banner and nearly 8,300 under Family Dollar. About 45% of Dollar Tree's sales in fiscal 2022 were composed of consumables (including food, health and beauty, and cleaning products), nearly 50% from variety items (including toys and homewares), and over 5% from seasonal items. The Dollar Tree banner sells most of its merchandise at the $1.25 price point and positions its stores in well-populated suburban markets. Conversely, Family Dollar primarily sells consumable merchandise (nearly 80% of the banner's sales) at prices below $10. About two-thirds of Family Dollar's stores are located in urban and suburban markets, with the remaining one-third located in rural areas.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Dollar Tree Inc | 20.73 | 2.78 | 0.86 | 2.24% | $0.49 | $2.14 | 8.23% |
| Walmart Inc | 31.83 | 5.60 | 0.71 | 10.39% | $14.27 | $39.78 | 5.74% |
| Costco Wholesale Corp | 39.26 | 9.82 | 1.02 | 8.88% | $3.71 | $9.72 | 9.5% |
| Target Corp | 15.24 | 4.28 | 0.48 | 7.08% | $1.9 | $6.97 | -4.85% |
| Dollar General Corp | 12.03 | 4.09 | 0.67 | 7.67% | $0.9 | $3.04 | 3.93% |
| BJ's Wholesale Club Holdings Inc | 18.34 | 7.43 | 0.48 | 11.12% | $0.26 | $0.9 | -2.75% |
| Sendas Distribuidora SA | 19.41 | 3.67 | 0.25 | 3.85% | $1.15 | $2.56 | 20.26% |
| Pricesmart Inc | 18.99 | 1.81 | 0.46 | 1.38% | $0.05 | $0.19 | 9.48% |
| Almacenes Exito SA | 417.36 | 0.70 | 0.21 | -0.1% | $306.87 | $1339.43 | 8.52% |
| Average | 71.56 | 4.68 | 0.54 | 6.28% | $41.14 | $175.32 | 6.23% |
Upon analyzing Dollar Tree, the following trends can be observed:
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The Price to Earnings ratio of 20.73 is 0.29x lower than the industry average, indicating potential undervaluation for the stock.
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Considering a Price to Book ratio of 2.78, which is well below the industry average by 0.59x, the stock may be undervalued based on its book value compared to its peers.
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With a relatively high Price to Sales ratio of 0.86, which is 1.59x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a lower Return on Equity (ROE) of 2.24%, which is 4.04% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
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The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $490 Million, which is 0.01x below the industry average. This potentially indicates lower profitability or financial challenges.
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The company has lower gross profit of $2.14 Billion, which indicates 0.01x below the industry average. This potentially indicates lower revenue after accounting for production costs.
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With a revenue growth of 8.23%, which surpasses the industry average of 6.23%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
In terms of the Debt-to-Equity ratio, Dollar Tree can be assessed by comparing it to its top 4 peers, resulting in the following observations:
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When comparing the debt-to-equity ratio, Dollar Tree is in a stronger financial position compared to its top 4 peers.
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The company has a lower level of debt relative to its equity, indicating a more favorable balance between the two with a lower debt-to-equity ratio of 1.15.
Key Takeaways
The valuation analysis for Dollar Tree in the Food & Staples Retailing industry indicates that its PE, PB, and PS ratios are relatively low compared to its peers. This suggests that Dollar Tree may be undervalued in terms of its earnings, book value, and sales. However, its low ROE, EBITDA, gross profit, and high revenue growth indicate potential challenges in generating profitability and efficiency. Therefore, further analysis is required to assess Dollar Tree's competitive position within the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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