Are you thinking of investing in Dollar Tree stocks? The company owns 15,606 stores in the 48 contiguous United States and five Canadian provinces. It has a price-earnings ratio of 16 and has a history of outperforming the market during periods of low consumer confidence. Read on to learn more about the company and its potential for growth. Here are three reasons to consider buying Dollar Tree stocks. We will explore each of these factors and help you decide which one to buy.
Dollar Tree operates 15,606 stores across 48 states and five Canadian provinces
Dollar Tree operates retail discount stores under several brands, including Family Dollar and Dollars Only. It also operates stores in Canada under the Dollar Tree Canada brand. The company’s net merchandise inventory increased by 2.3% in the third quarter of fiscal 2020, and it repaid $500 million on its revolving credit facility. As of October 31, 2020, the company had net long-term debt of $3,225.3 million and $6,961.1 million in shareholders’ equity.
Dollar Tree’s strategy is to maintain its reputation as the world’s most affordable retail concept. The company is a leader in discount variety stores, operating more than 15,606 locations across the U.S., Canada, and the U.K. It sells merchandise at fixed price points, including $1.00, $1.25, and a quarter of a penny. However, it will have to make some changes.
It is the parent company of Family Dollar
The parent company of Family Dollar Tree has announced the closing of 404 of its locations in the United States. The reason for the shutdown is unclear. Ultimately, the company has decided to close the stores due to the risk of contamination by rodents. This bacteria, also known as salmonella, can infect humans. It is especially dangerous for people with compromised immune systems. Dollar Tree has not confirmed any consumer complaints or reports of illnesses.
The company plans to finance the acquisition through existing cash on hand and bank debt and bonds. The company anticipates strong free cash flow and a healthy balance sheet after the transaction. Family Dollar stockholder approval is required prior to closing. The transaction must also pass the Hart-Scott-Rodino Antitrust Improvements Act and meet custom closing conditions. However, the company plans to continue to open new stores in areas where the competition is strong.
It has a price/earnings-to-growth ratio of 16
The price/earnings-to growth ratio (PEG) of Dollar Tree stocks is a measure of the equity instrument’s potential value. The PEG ratio is calculated by dividing the price of an equity instrument by its earnings growth rate. Most analysts use this measure instead of the P/E ratio. A low PEG ratio generally indicates undervaluation of the equity instrument, while a high PEG ratio implies a reasonably priced equity.
The price/earnings-to-GDP ratio is another way to measure a stock’s potential value. For Dollar Tree, this ratio is 16 and the company’s price/earnings ratio is 16. However, if you have a high P/EG ratio, then you may want to consider buying shares of other companies. In addition to P/EG, look at a company’s price-to-book ratio.
It has a strong track record of outperforming the market during times of low consumer confidence
Although a stock in a company like Dollar Tree can be risky, it does have a proven track record of outperforming the market in times of weak consumer confidence. Its stock is currently trading at a premium to the median value of the consumer discretionary sector, and has a high price-to-earnings ratio. Dollar Tree’s stock is not paying a dividend and analysts believe its price is expensive.
Despite the recent drop in the consumer confidence index, Dollar Tree remains a strong pick for investors. The company’s financial position, dividend yield and track record of outperforming the market during periods of low consumer confidence are all positive factors. Investors should also pay special attention to the company’s management team, insider selling, and major shareholders. Standard & Poor’s Capital IQ (SPI) reports financial data on a quarterly, yearly, and five-year basis.
