Dollar General Corporation (DG)

Conclusion

Dollar General is a discount retailer in the southern, southwestern, midwestern and eastern United States, selling consumables, perishables, seasonal goods, home products and apparel. The share closed at 136.68 USD on 9 November 2026, giving a market capitalisation of 30.2 billion USD and an enterprise value of 44.2 billion USD.

The verdict is undervalued. Today's P/E of 17.7x sits below its ten-year median of 18.7x, EV/EBITDA of 12.6x is against a median of 13.8x, and P/FCF of 11.2x is against 21.7x. The DCF gives 223.19 USD per share, and the fair value from historical multiples is 205.98 USD. The fair value band runs from 171.67 to 257.50 USD with a midpoint of 214.58 USD, a margin of safety of 57.0% at the current price. The reverse DCF implies revenue growth of -1.7% a year, while revenue actually grew 4.8% a year over five years. Free cash flow per share fell 1.0% a year over the same period, so the price assumes less than the company has delivered on the top line.

What holds the case up is free cash flow conversion of 158.6% on a trailing basis, a Piotroski score of 7 out of 9, and interest coverage of 12.3x. What could break it is the five-year EPS decline of -8.4% a year, an operating margin of 5.6% against its ten-year median of 8.4%, and net debt to EBITDA of 4.0x. Return on invested capital of 8.0% sits only just above the cost of capital of 7.2%.

Financial health

Financial strength is green, held up by interest coverage of 12.3x and a current ratio of 1.2x, both assessed good. The quick ratio is 0.23x, and debt to equity stands at 1.7x. Net debt to EBITDA of 4.0x is assessed neutral, as is the Altman Z-score of 2.68. The Altman model was designed for manufacturers, and Dollar General is a retailer, so its zone (grey) is only indicative. Insolvency risk: low, about 1.1% by the estimate of the Ohlson model over one to two years. The company reports its interest expense, so the coverage ratio is based on reported figures. Debt has fallen 1.9% a year over five years, which eases the pressure from leverage, but the debt load remains substantial relative to earnings.

Earnings quality

Earnings quality is green. Free cash flow conversion is 158.6% on a trailing basis but 76.7% on a five-year average, so the recent year flatters the picture. The accrual ratio is -6.8%, meaning reported earnings are backed by cash. Stock-based compensation is 0.28% of revenue, and free cash flow after it is 2.6 billion USD. The share count has fallen 2.5% a year over five years, reflecting buybacks. The Piotroski score is 7 of 9, assessed good. The Beneish M-score is not available. The company beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 14.8%. Analysts raised current-year estimates over the last 30 days with no cuts, and the next-year estimate rose 4.9% over 90 days.

Profitability

Profitability is yellow, with all four margin signals assessed neutral. The gross margin of 31.2% is slightly above its ten-year median of 30.7%. The operating margin of 5.6% is well below its median of 8.4%, and the net margin of 3.9% is below its median of 6.2%. Operating margin stability is 24.2%. Return on invested capital is 8.0% against a weighted cost of capital of 7.2%, and the given difference is 0.9%, assessed neutral. The five-year median ROIC is 7.8%. Return on equity of 18.3% looks strong, but the DuPont split shows it rests on leverage: a net margin of 3.5%, asset turnover of 1.38x and an equity multiplier of 3.64x, as of January 2026.

Growth

Growth is yellow. Revenue has grown 4.1% a year over three years, 4.8% over five and 7.7% over ten, and it has risen in each of the last 10 years. Earnings per share are the weak point, falling 13.8% a year over three years and 8.4% over five, while the ten-year rate is 5.7%. Free cash flow per share grew 79.5% a year over three years from a low base, but it fell 1.0% a year over five and rose 13.9% over ten. Analysts expect next-year earnings per share to grow 5.6%. The consistent top-line record is the strongest part of this picture, but the recent decline in per-share profit has not yet been reversed.

Valuation

Valuation is green, with the verdict assessed good. Against their ten-year medians, the P/E of 17.7x carries a discount of 5.5%, EV/EBITDA of 12.6x a discount of 8.7%, P/FCF of 11.2x a discount of 48.7%, P/S of 0.69x a discount of 39.1% and P/B of 3.2x a discount of 33.6%. The DCF gives 223.19 USD per share, using a discount rate of 8.9%, a five-year growth rate of 5.6% and a terminal growth rate of 2.5%. The terminal value accounts for 56.4% of the DCF. The fair value band runs from 171.67 to 257.50 USD, with a midpoint of 214.58 USD. These are estimates built on fixed assumptions, not price targets. The reverse DCF implies growth of -1.7%, against five-year revenue growth of 4.8%. The dividend yield is 1.7%, and dividends absorb 19.3% of free cash flow.

Risks

The main risk is that the earnings decline continues. The five-year EPS CAGR of -8.4% suggests that per-share profit could keep shrinking even while revenue grows. A further fall in the operating margin from 5.6% toward the 8.4% median would be a gain, but a slide below current levels would squeeze returns. ROIC of 8.0% barely clears WACC of 7.2%, so any loss of return would erode the spread quickly. Net debt to EBITDA of 4.0x leaves little room if earnings fall. The DCF depends heavily on the terminal value, which makes up 56.4% of it, so the value is sensitive to the discount rate and terminal assumptions. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue by segment, so refinancing timing and the performance of individual store categories cannot be assessed.