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Company Overview: Dollar Tree Inc. (NASDAQ: DLTR) operates discount variety stores that provide retail and other assortments of services. It offers a broad range of general merchandise products, such as housewares, candies, seasonal goods, toys, cosmetics, health and self-care products, gifts, stationery, books, and other consumer items. DLTR owns DollarTree.com (Dollar Tree), an e-commerce platform, and Family Dollar Stores, Inc. (Family Dollar), which it acquired in July 2015. As of July 31, 2021, DLTR's store count was 15,865, spread across 48 states and 5 Canadian provinces.
DLTR Details
Key Takeaways from Q2FY21 (ended July 31, 2021)
Revenues & Gross Profit Key Highlights; Analysis by Kalkine Group
Recent Real Estate Developments: In its Q2FY21 Release, DLTR stated that it is making significant efforts to expand and manage its market position across urban, suburban, and rural regions.
Other Key Findings in Q2FY21
Stores Highlights; Analysis by Kalkine Group
Balance Sheet & Liquidity Position
Key Metrics: In Q2FY21, DLTR's operating and net margins were 6.3% and 4.5%, slightly higher than 6.0% and 4.2%, respectively reported in Q2FY20. ROE stood at 3.9%, at par with the Q2FY20 return. Debt/Equity was 0.46x as of July 30, 2021, vs. the industry median of 0.68x.
Profitability and Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 38.28% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc. and BlackRock Institutional Trust Co., N.A. hold the maximum stake in the company at 10.88% and 4.92%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Outlook
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last nine months, DLTR’s share price has corrected ~19.39%. The stock is currently close to the lower end of its 52-week range of USD 84.41 to USD 120.37. We have valued the stock using the Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of low twenties (in percentage terms). We believe that the company can trade at a discount compared to its peer's average, considering the disruptions in its distribution network, dependence on few third parties for its deliveries, and trade restrictions. We have taken peers like Dollar General Corporation (NYSE: DG) and Target Corporation (NYSE: TGT). Considering the decent top and bottom-line performance, expansion plans, new store openings, positive outlook, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 89.99, down ~0.61% as of September 01, 2021.
DLTR Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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