In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Dollar Tree DLTR in relation to its major competitors in the Food & Staples Retailing industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company's performance in 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 | 20.67 | 2.77 | 0.86 | 2.24% | $0.49 | $2.14 | 8.23% |
| Walmart Inc | 25.96 | 5.29 | 0.66 | 10.39% | $14.27 | $39.78 | 5.74% |
| Costco Wholesale Corp | 40.85 | 10.22 | 1.06 | 8.88% | $3.71 | $9.72 | 9.5% |
| Target Corp | 16.55 | 4.79 | 0.56 | 7.93% | $2.06 | $7.25 | 2.52% |
| Dollar General Corp | 12.07 | 4.11 | 0.67 | 7.67% | $0.9 | $3.04 | 3.93% |
| BJ's Wholesale Club Holdings Inc | 18.12 | 7.34 | 0.47 | 11.12% | $0.26 | $0.9 | -2.75% |
| Sendas Distribuidora SA | 21.86 | 4.13 | 0.28 | 4.38% | $1.36 | $2.76 | 22.92% |
| Pricesmart Inc | 19.25 | 1.84 | 0.47 | 1.38% | $0.05 | $0.19 | 9.48% |
| Average | 22.09 | 5.39 | 0.6 | 7.39% | $3.23 | $9.09 | 7.33% |
By carefully studying Dollar Tree, we can deduce the following trends:
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A Price to Earnings ratio of 20.67 significantly below the industry average by 0.94x suggests undervaluation. This can make the stock appealing for those seeking growth.
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With a Price to Book ratio of 2.77, significantly falling below the industry average by 0.51x, it suggests undervaluation and the possibility of untapped growth prospects.
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The stock's relatively high Price to Sales ratio of 0.86, surpassing the industry average by 1.43x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a lower Return on Equity (ROE) of 2.24%, which is 5.15% 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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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $490 Million, which is 0.15x below the industry average, the company may face lower profitability or financial challenges.
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The company has lower gross profit of $2.14 Billion, which indicates 0.24x below the industry average. This potentially indicates lower revenue after accounting for production costs.
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The company's revenue growth of 8.23% exceeds the industry average of 7.33%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative to its equity.
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.
By analyzing Dollar Tree in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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Dollar Tree has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 1.15.
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This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator by investors.
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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