Dollar Tree Inc (DLTR)

Conclusion

Dollar Tree operates discount stores in the United States and Canada, selling consumables, variety merchandise and seasonal goods. At 137.23 USD on 2026-11-09, the shares carry a market capitalisation of 25.75 billion USD and an enterprise value of 32.36 billion USD.

The verdict is fair. Against their own ten-year medians, the price-to-earnings ratio of 15.97 sits below 19.46, the enterprise value to EBITDA of 10.63 below 13.25 and the price to free cash flow of 13.89 below 23.83, while the price to book of 7.52 stands above 3.67. The DCF gives 131.14 USD per share at a discount rate of 8.9%, and the fair value from historical multiples is 167.26 USD. The fair value band runs from 119.36 to 179.04 USD with a midpoint of 149.20 USD, a margin of safety of 8.7% at the current price. The reverse DCF implies revenue growth of 1.2% a year, while revenue has compounded at -5.3% over the past five years.

What holds the case up is return on invested capital of 16.4% against a WACC of 7.7%, interest coverage of 29.5 and free cash flow of 1.77 billion USD after stock-based compensation. The share count has also fallen 2.8% a year over five years, which supports per-share figures. What would break the case is five-year revenue compound growth of -5.3%, a next-year EPS growth estimate of -0.4%, and net debt to EBITDA of 2.17.

Financial health

Financial strength is green, held up by an Altman Z-score of 3.79 and interest coverage of 29.5, and tempered by neutral readings on leverage and liquidity. The current ratio is 1.13, net debt to EBITDA is 2.17 and debt to equity is 2.24. The quick ratio is not available. The Altman Z-score of 3.79 places the company in the safe zone, though that model was designed for manufacturers and Dollar Tree is a retailer, so treat it as a rough guide. Insolvency risk: low, about 0.8% by the estimate of the Ohlson model over one to two years, based on figures as of 2026-01-31.

Earnings quality

Earnings quality is green, supported by a trailing free cash flow conversion of 1.15, a Piotroski score of 8 out of 9 and seven beats in eight quarters. The five-year free cash flow conversion figure reads 21.83 as reported. The accrual ratio is -0.0777, meaning cash generation exceeds accounting profit. Stock-based compensation is 0.4% of revenue, and free cash flow after it is 1.77 billion USD. The share count has fallen 2.8% a year over five years, pointing to buybacks. The Beneish M-score is not available. The average earnings surprise is 17.7%. Current-year estimates rose 13.8% over the past 90 days, while next-year estimates rose 2.8%.

Profitability

Profitability is green, led by return on invested capital of 16.4% against a WACC of 7.7%, with the data recording a ROIC minus WACC value of 8.7%. Gross margin is 38.7% against a ten-year median of 31.2%, operating margin is 10.7% against 8.3%, and net margin is 8.0% against 4.7%. Operating margin stability is 0.59. The five-year median ROIC is 8.7%, so current returns sit well above their history. Return on equity of 47.1% overstates business quality. The DuPont split shows a net margin of 6.6%, asset turnover of 1.44 and an equity multiplier of 3.59, so leverage does much of the work.

Growth

Growth is red. Revenue compound growth is 8.0% over three years, but -5.3% over five and 2.3% over ten. Revenue grew in 9 of 10 comparable years. EPS compound growth is -4.8% over three years, 1.9% over five and 17.3% over ten. Free cash flow per share grew 61.4% over three years but fell 2.4% a year over five. The next-year EPS estimate implies growth of -0.4%, with two upward and one downward revision in the last 30 days.

Valuation

Valuation is yellow, in line with a fair verdict. The price-to-earnings ratio of 15.97 carries a premium of -17.9% against its ten-year median of 19.46, and enterprise value to EBITDA of 10.63 carries -19.8% against 13.25. Price to free cash flow of 13.89 carries -41.7% against 23.83, while price to sales of 1.28 carries 21.4% against 1.06 and price to book of 7.52 carries 104.6% against 3.67. The DCF gives 131.14 USD per share at a discount rate of 8.9%, with 53% of that value in the terminal value. The fair value band runs from 119.36 to 179.04 USD, with a midpoint of 149.20 USD and a margin of safety of 8.7%. The reverse DCF implies growth of 1.2%, against delivered revenue growth of -5.3% and free cash flow per share growth of -2.4% over five years. The dividend yield is zero. The fair value figures are estimates built on fixed assumptions, not a price target.

Risks

Weak revenue would keep the growth case under pressure; the -5.3% five-year revenue figure and the -0.4% next-year EPS estimate are the clearest warnings. Leverage would matter if earnings fell: net debt to EBITDA of 2.17 and debt to equity of 2.24 leave less room, and a current ratio of 1.13 gives a thin liquidity cushion. The DCF rests on assumptions, and 53% of its value sits in the terminal value, so small changes in long-term assumptions would move it. Not available: the quick ratio, the Beneish M-score, a debt maturity schedule and revenue by segment. This analysis uses only the figures supplied, so it cannot judge when debt falls due or which business lines drive revenue.