Dealmaker’s Diary: Tariff Terror Is Fuel for This Dollar Store Leader

Alpesh Patel|April 24, 2025

While many investors have been wringing their hands over the market volatility…

I’ve found the cockroach of retail stocks – the one that not only survives market nuclear winters but actually thrives in them.

Odd analogy I know, but hear me out…

This dollar store retailer wasn’t supposed to surge 44% while the market crashed.

That wasn’t in anybody’s playbook.

But here we are, watching it climb from $66 to $95 while “safer” investments implode.

Why?

Because when panic selling meets economic anxiety, guess where consumers flock?

Not to Apple stores or Tesla showrooms – they rush to discount retailers selling life’s essentials at prices that won’t trigger cardiac arrest.

Let’s dive into the numbers behind Wall Street’s most counterintuitive winner.

Click on the thumbnail below to check out the full details of today’s Dealmaker Diary.

Transcript

Hello friends.

I hope you had a peaceful, happy Easter.

Welcome to another Stock of the Week with Dealmaker Diary featuring Dollar General (DG).

Now, I’m not suggesting there’s going to be a recession forcing everyone to shop at discount stores – though that might happen.

As always, we’re focused on analyzing the data.

Let’s dig into it.

Dollar General is a $20 billion company.

I was surprised by its size. I knew it was big, but not to this extent.

Their net sales are $40 billion and growing, which is a positive indicator. The company was founded in 1939, during a significant period in world history.

Before diving into their valuation and growth figures, I want to continue my new segment highlighting how these companies utilize AI technology.

Dollar General implements AI-driven produce ordering systems.

I’m learning about industries I’m not overly familiar with.

Their AI initiatives include reducing food waste through a nationwide system rollout that enhances forecasting capabilities. Chipotle’s stock surged after being among the first to adopt AI for supply chain management.

Dollar General also supports Food First initiatives, providing fresh, affordable food.

Additionally, they leverage Internet of Things technology and AI throughout their stores to improve operational efficiency and reduce costs.

Now for their performance metrics.

On my proprietary Value Growth Income rating algorithm, which weighs growth, value, and dividend deals, Dollar General scores a 7.

This meets my minimum acceptable criteria of 7-10.

The declining stock price presents an opportunity, as I believe the stock has overcorrected downward.

The forecast price-to-earnings ratio is $17 for every future dollar of profits, not particularly cheap despite the price drop.

Cash return on capital invested (CROCI) is a respectable 6.4, using the Goldman Sachs metric I’ve discussed in previous videos.

Volatility remains below 20%, though I’d prefer to see it lower. This elevated volatility stems from recent steep price drops, which should eventually stabilize.

I’m watching the rebound from $66 to $95, representing a 50% increase already.

The key question is whether it will continue rising or repeat its 2024 pattern of pulling back after initial gains. I believe the lower valuation supports continued growth.

In 1994, we saw similar conditions – comparable valuations, breakout promises, and upward momentum – but the price then was $180, double today’s level.

With a fair value of $144 based on discounted cash flow analysis – approximately the price from which it fell – there’s potential for another 40% upside.

Overall, while not perfect, several metrics favor this company.

I hope you found this analysis both informative and entertaining.

Thank you for watching.