Down 45% in 6 Months, Is Dollar General Stock Too Cheap to Pass Up?

Core Viewpoint - Dollar General's stock has significantly declined, trading near seven-year lows, raising concerns about its future performance amid a cash-strapped consumer environment [2][5]. Group 1: Stock Performance - Dollar General's stock has dropped over 45% in the past six months, reflecting a severe downturn [2]. - The stock is currently trading at 13 times trailing earnings, well below its five-year average of nearly 21 [5]. - Analysts suggest that Dollar General could rise about 30% from its current trading levels over the next 12 to 18 months [5]. Group 2: Business Challenges - The company has been missing earnings expectations, with management indicating that its core customer is "financially constrained" [2]. - Same-store sales increased only 0.5% for the quarter ended August 2, while operating profits fell by 21% year over year [2]. - Dollar General's thin profit margins have been under pressure for years, exacerbated by its aggressive expansion strategy [3][4]. Group 3: Expansion Strategy - The company opened its 20,000th store earlier this year, but this expansion may lead to cannibalization of sales from nearby locations [3]. - Managing additional stores requires more staff and incurs greater overhead, further straining profitability [4]. - There are concerns that continued expansion amidst a deteriorating financial situation could be detrimental to the company's performance [6].