10 Oversold Growth Stocks to Invest In

3) Dollar General Corporation (NYSE:DG)

Forward P/E (As of 14 October): 12.8x

% Decline on a YTD Basis: ~43%

Number of Hedge Fund Holders: 42

Dollar General Corporation (NYSE:DG) has been on a strategic shift, focusing on a back-to-basics approach. This is targeted at improving core operations and enhancing customer value. It has also made significant strides in addressing several operational issues, such as shrink reduction and resolving supply chain bottlenecks. Dollar General Corporation (NYSEDG)’s efforts to improve price positioning relative to Walmart are being regarded as a positive development by Wall Street. This can strengthen its competitive stance.

Moreover, the improvements in inventory management and in-stock levels can help the company achieve revenue growth in the near term. Also, enhanced price competitiveness, streamlined operations, and strengthened brand perception are expected to act as primary tailwinds. Dollar General Corporation (NYSE:DG) is also focusing on making investments in markdowns to help customers and improve sales. Also, the company plans to increase efforts to gain more market share.

Wall Street also expects that promotions and markdowns in critical categories should drive traffic and assist lower-income customers. As per Wall Street, the shares of Dollar General Corporation (NYSE:DG) have an average price target of $102.79.

Heartland Advisors, an investment management company, released its third-quarter 2024 investor letter. Here is what the fund said:

“Consumer Staples. The convenience store operator Dollar General Corporation (NYSE:DG) was our worst performer during the quarter. The retailer, with more than 19,000 stores, 80% of which are in rural towns with populations of less than 20,000, recently slashed its 2024 earnings guidance, sparking a late-summer sell-off.

Same-store comparable sales and margin guidance were cut meaningfully, implying a significant slowdown in the second half of the year. While some of the troubles may be due to the financial challenges of its core customers, with average incomes of just $35,000, Dollar General is also losing market share because of Walmart’s initiative to reduce entry-level pricing. Management acknowledged a need to invest in promotions to stimulate demand, but they refute concerns that DG needs to invest more in store-level labor.

We exited the position and harvested the tax losses, but we continue to monitor the company’s fundamentals. We’re looking for comparable sales to stabilize driven by promotional activity, a boost in labor investments, and management to downsize store expansion plans to improve free cash flow generation and accelerate deleveraging efforts.”