Dollar General vs. Dollar Tree: Which One Looks Better Ahead of Earnings?
Deep discount retail chains Dollar General (NYSE: DG) and Dollar Tree (Nasdaq: DLTR) are both set to release fiscal first quarter earnings results before the market opens on Thursday, May 28. Let's break down the two companies with how the fundamental and technical indicators look ahead of those earnings reports.
Looking at the fundamental ratings from Tickeron, we see that the companies have similar ratings in three categories, but Dollar General scores much better when it comes to the Profit vs. Risk Rating and it also scores better in the P/E Growth Rating category.
Tickeron ratings are formulated such that a rating of 1 designates the most successful stocks in a given industry, while a rating of 100 points refers to the least successful stocks for that industry.
Dollar Tree's Valuation (68) in the Discount Stores industry is in the same range as Dollar General (77). This means that the two stocks are priced similarly in terms of the valuation based on price-t0-earnings, price to book, price to sales, and projected growth (PEG ratio).
Dollar General's SMR Rating (48) is in the same range as Dollar Tree's (53). This means the companies have seen similar sales growth, similar return on equity readings and profit margins.
Dollar General's Price Growth Rating (41) in the Discount Stores industry is in the same range as Dollar Tree (54). This means that stock grew similarly at similar rates over the last 12 months.
Dollar General's P/E Growth Rating (20) is significantly better than Dollar Tree's (49). This means that Dollar General’s P/E growth has been better than Dollar Tree's over the last 12 months.
Dollar General's Profit vs Risk Rating (2) is significantly better than the same rating for Dollar Tree (91). This is a very wide discrepancy and suggests that Dollar General is a better investment right now.
The overall fundamental ratings tend to favor Dollar General over Dollar Tree. Looking at the AI predictions for each stock we see that both generated signals four days ago, but the signal for Dollar Tree was bearish and the signal for Dollar General was bullish.
The predictions go along with what the stocks have done over the past year. From May 2, 2019 through May 22, 2020, Dollar General is up 47.91% while Dollar Tree is down 17.95%. If we look at the weekly charts for the two stocks we see that Dollar General has doubled in price over the last two years, but the stock is also overbought based on its weekly stochastic indicators.
Dollar Tree is actually lower than where it was two years ago, but it was higher in the middle. The stock traded between $80 and $90 for most of Q4 2018 and then rose to almost $120 in October 2019 before falling for the last eight months.
What's really concerning about Dollar Tree's chart are the big drawdowns in May '18, August '18, and November '19 were all the result of earnings announcements. This signifies that the stock has a propensity for gapping lower after earnings reports.
Dollar Tree did just move back above its 13-week moving average and that could be a good sign for the stock. If we look at where the technical analysis indicators are for both stocks, we see that there are more positive results for Dollar Tree than Dollar General.
The table above shows that the AROON Indicator, MACD, Momentum Indicator, and Moving Averages have all signaled bullishly for Dollar Tree and there haven't been any bearish signals from the technical indicators. For Dollar General, there is only one bullish signal (Momentum), but three bearish signals from the Stochastic readings, MACD, and the Bollinger Bands.
Taking all of this in to account, a slight
Based on the AI signals and the fundamental indicators, I would have to give the edge to Dollar General. There is also the matter of Dollar Tree falling sharply after three different earnings reports over the last few years.
DG's RSI Indicator ascends from oversold territory
The RSI Indicator for DG moved out of oversold territory on November 21, 2024. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 31 similar instances when the indicator left oversold territory. In of the 31 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where DG advanced for three days, in of 309 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 13, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on DG as a result. In of 90 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for DG turned negative on December 16, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 48 similar instances when the indicator turned negative. In of the 48 cases the stock turned lower in the days that followed. This puts the odds of success at .
DG moved below its 50-day moving average on December 12, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for DG crossed bearishly below the 50-day moving average on December 18, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 13 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where DG declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
DG broke above its upper Bollinger Band on December 06, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (2.236) is normal, around the industry mean (8.013). P/E Ratio (12.317) is within average values for comparable stocks, (41.455). Projected Growth (PEG Ratio) (2.110) is also within normal values, averaging (2.817). Dividend Yield (0.032) settles around the average of (0.022) among similar stocks. P/S Ratio (0.409) is also within normal values, averaging (1.306).
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. DG’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. DG’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 59, placing this stock worse than average.
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Industry description
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Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
an operator of retail stores
Industry DiscountStores