3 Reasons Why an S&P 500 Correction Won't Stop Me From Buying More Dollar General Stock

Core Viewpoint - Dollar General has experienced a significant decline in stock price, down approximately 70% over the last 2.5 years, despite achieving record net sales of over $40 billion in fiscal 2024. The company is facing profit challenges, particularly with its earnings per share (EPS) being halved in recent years, but there are signs of recovery and potential for future growth [2][4][7]. Group 1: Profit Challenges - Dollar General's gross margin has decreased due to inventory issues, including excess stock leading to damage, theft, and markdowns, resulting in a current gross margin below its long-term average [6]. - The company's EPS for 2024 was$5.11, with management projecting a range of $5.10 to$5.80 for 2025, indicating potential year-over-year growth of nearly 14% if the high end is achieved [10]. - Long-term guidance suggests annual EPS growth of at least 10% starting in 2026, with the possibility of doubling EPS over the next five to seven years, although this would still not surpass previous all-time highs [11][12]. Group 2: Recovery and Growth Potential - Dollar General is beginning to see improvements in theft and inventory management, with management expecting this positive trend to continue into 2025 [8][9]. - The stock is currently considered cheap, with a projected EPS of $6.80 by 2027 based on a 10% annual growth rate, translating to a price-to-earnings ratio of only 12 times future earnings [14]. - The company offers a dividend yield of nearly 3%, providing investors with returns while waiting for profit improvements [15]. Group 3: Economic Resilience - Despite current economic uncertainties affecting the S&P 500, Dollar General has historically performed well during economic downturns, suggesting it may continue to be a resilient investment [16].