How’s Dollar Tree Stock Trading Compared to Its Peers?



YTD return

Dollar Tree (DLTR) stock rose by 6.5% on a YTD (year-to-date) basis as of November 25, 2015. It hasn’t provided any dividend. This makes the total return of the stock equal to its price return of 6.5%. Its peers include Costco (COST), Walmart (WMT), and Dollar General (DG). They had total returns of 19.6%, -28.5%, and -7.0%, respectively. The SPDR Consumer Discretionary Select Sector ETF (XLY) had a total return of 14.5% for the same period.

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Valuation multiples

Dollar Tree’s current PE (price-to-earnings) ratio is 26.52x. This is expensive compared to its closest peers like Dollar General. It’s trading at 17.38x. Walmart (WMT) is trading at 12.79x. Big Lots (BIG) is trading at 17.5x. As a whole, the industry has an average current PE ratio of 26.0x.

Dollar Tree’s earnings trend suggests that the earnings should increase in the next fiscal year. The Family Dollar stores will be completely integrated into the company. The forward PE ratio should fall to 21.83x. The fiscal 2016 PE ratio is 19.83x. A 41% rise in the adjusted EPS (earnings per share) is expected in fiscal 2016.

The company’s current price-to-sales ratio is 1.30x. The industry’s average current price-to-sales ratio is 1.93x. The forward price-to-sales ratio is 0.85x.

In the next part, we’ll discuss the outlook for the next quarter.


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