Despite being hit hard by the COVID-19 pandemic, the U.S. stock markets delivered solid returns last year. 2020 ended with major indices hovering around their all-time highs. Thanks to an increased dependence on technology products, major tech stocks, which are widely viewed as quasi-growth stocks, are currently trading at lofty valuations…
However, rising market volatility and a potential market bubble have been tempering the popularity of growth stocks. As a result, investors are seeking to divert their capital to potential turnaround candidates that underperformed in the wake of the pandemic. The beginning of this trend is evident in the iShares Russell 1000 Value ETF’s (IWD) 16.3% gain over the past three months versus the iShares Russell 1000 Growth ETF’s (IWF) 8.8% returns.
Stocks such as Dollar General Corporation (DG – Get Rating), The Kroger Co. (KR – Get Rating), Affiliated Managers Group, Inc. (AMG – Get Rating) and Hibbett Sports, Inc. (HIBB – Get Rating) have performed very well so far and are currently trading at discounts to their peers. So, we think these stocks are well-positioned to effectively manage through the uncertainties and gain with an economic recovery.
DG is a discount retailer, offering a selection of merchandise, such as consumables, seasonal, home products and apparel. In addition to its private brands, DG also sells products from other manufacturers, such as Procter & Gamble, Coca-Cola, Unilever, Nestle, Kellogg’s, PepsiCo, and others.
In terms of trailing-12-month P/E, DG is currently trading at 20.93x, 14.2% lower than the industry average of 24.40x.
In November, DG announced its plans to set up a DG Fresh and Dry Combination Facility in Nebraska with an initial investment of $85 million. This dual distribution center is expected to l enable DG to expand its foothold in the Midwest region.
On November 13, DG expanded its holiday savings events to help customers celebrate and stretch their budgets during the holiday season. Through a series of sales events DG served customers by increasing contactless options with DG Pickup and self-checkout, delivering clean and inviting store environments.
DG’s net sales have increased 17.3% year-over-year to $8.20 billion in the fiscal third quarter ended October 30, 2020. Its operating profit has risen 57.3% from the year-ago value to $773.13 million, while its EPS has improved 62.2% from the same period last year to $2.32.
Analysts expect DG’s revenues to grow 15.6% year-over-year to $8.28 billion in the current quarter ending January 31, 2020. The consensus EPS estimate of $2.72 for the current quarter indicates a 3% improvement year-over-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 30.4% over the past year.
How does DG stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #16 of 40 stocks in the Grocery/Big Box Retailers industry.
KR manufactures and processes food for sale in its supermarkets. The company operates supermarkets, multi-department stores, jewelry stores and convenience stores throughout the United States.
KR’s trailing-12-month non-GAAP P/E of 10.43x is 49.8% lower than the industry average of 20.78x. In terms of trailing-12-month Price/Sales, the stock is currently trading at 0.2x, 86.5% lower than the industry average of 1.49x.
In December, KR was named to the…
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