Is Dollar General (DG) a great value stock right now?

On By Littum

Here at Zacks, we focus on our proven ranking system, which emphasizes earnings estimates and estimate revisions to find winning stocks. But we also understand that investors develop their own strategies, so we constantly look at the latest trends in value, growth and momentum to find strong companies for our readers.

Given these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis of key valuation metrics to find stocks they believe are undervalued, leaving room for profit.

In addition to the Zacks Rank, investors looking for stocks with specific characteristics can use our Style Scores system. Naturally, value investors will be most interested in the system’s “Value” category. Stocks with “A” grades for value and high Zacks Ranks are among the best value stocks available at any given time.

A company to watch right now is Dollar General (DG). DG currently has a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading at P/E ratio of 13.16 right now. Comparatively, its industry has an average P/E of 28.92. Over the past 52 weeks, GD’s Forward P/E has been as high as 21.73 and as low as 10.58, with a median of 17.26.

DG also has a PEG ratio of 2.25. This popular figure is similar to the widely used P/E ratio, but the PEG ratio also takes into account a company’s expected EPS growth. DG’s PEG compares to its industry’s average PEG of 3.22. Over the past 52 weeks, DG’s PEG has been as high as 2.95 and as low as 1.68, with a median of 2.41.

Value investors also often use the P/S ratio. This metric is found by dividing a stock’s price by the company’s revenue. This is a preferred metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. DG has a P/S ratio of 0.45. This compares to the industry average P/S of 0.65.

Finally, we should also recognize that GD has a P/CF ratio of 7.76. This metric takes into account a company’s operating liquidity and can be used to find stocks that are undervalued based on their solid cash flow prospects. DG’s current P/CF looks attractive compared to the industry average P/CF of 28.53. GD’s P/CF has been as high as 14.12 and as low as 7.47, with a median of 11.45, all within the past year.

These are just a few of the key metrics included in Dollar General’s strong Value grade, but they help show that the stock is likely undervalued right now. Factoring in the strength of its earnings outlook, DG looks like an impressive value stock at the moment.