GM(GM) The Motley Fool·2025-06-01 09:03Core Viewpoint - Dollar General's stock has experienced significant volatility, with a 45% drop in 2023 and a further 44% decline in 2024, but has shown a recovery with a 31% increase year-to-date in 2025, making it one of the best performers in the S&P 500 [1] Financial Performance - Dollar General's earnings per share (EPS) have seen a sharp decline, with a 53% drop year-over-year in Q4 and a 32% decline for the full fiscal year [4][5] - The company reported diluted EPS of $5.11 for fiscal 2024, down from $10.68 in fiscal 2022, but management expects EPS to stabilize in fiscal 2025 with a forecast of $5.10 to $5.80, indicating potential growth of nearly 14% in a best-case scenario [13] Inventory Issues - A significant factor in the decline of profits has been the excessive inventory levels, which led to increased theft, damage to merchandise, and the need for discounts to clear stock [7][9] - Management has been addressing inventory issues, with theft decreasing and inventory levels approaching expected trends [10] Store Closures and One-Time Expenses - The sharp decline in Q4 profits was partly due to one-time expenses associated with closing underperforming stores, which would have otherwise resulted in relatively stable profits year-over-year [11] Economic Context - Despite high sales figures, the shift towards lower-margin food products due to economic pressures may limit profit potential [14] - Operational improvements are expected to enhance profits in the coming years, with additional growth anticipated once the economy improves [15] Valuation and Investment Potential - Dollar General's stock is currently trading at its lowest price-to-sales (P/S) valuation ever, suggesting it is undervalued relative to its profit potential [15] - If management can maintain control over past issues, the stock presents a buying opportunity as it is positioned for steady improvements [17]