Dollar General Corp. (DG): Can This be a Dollar Store, Literally?

Numbers on the price tag

To increase free cash flow, Dollar General Corp. (NYSE:DG) has allocated $300 million as capital expenditure and $155 million as working capital investment. This will result in a cash flow of $666 million by the end of this year, compared to $536 million last year. The company also aims at increasing their sales growth from 8.5% in the first quarter of 2013 to 12.4% in the fourth quarter of 2013.

DG PE Ratio TTM data by YCharts

Compared to its peers, Dollar General Corp. (NYSE:DG) has the highest operating margin of 12.41% and the lowest P/E TTM of 18.62. Dollar Tree, Inc. (NASDAQ:DLTR) reported an operating margin of 11.61% and a P/E TTM of 19.73, which is the highest among the three. Family Dollar Stores, Inc. (NYSE:FDO) has the lowest P/S ratio of 0.65, but also the lowest operating margin of 7.5% and a relatively higher P/E TTM of 18.72.

Thank you for shopping!

Looking at the numbers, Family Dollar Stores, Inc. (NYSE:FDO) is presently facing economic problems and suffering from low gross margins. So, I would suggest a sell at current prices.

FDO data by YCharts

As for Dollar General Corp. (NYSE:DG) and Dollar Tree, both have promising plans to increase revenue and their markets this year. Dollar General is trying to provide fresh produce to the customers and also increasing its revenue with tobacco rollout across all states. Similarly, Dollar Tree has implemented square footage growth to increase its selling space. Both of them look equally promising, and therefore I rate both these stocks as a buy.

The article Can This be a Dollar Store, Literally? originally appeared on Fool.com and is written by Dhara Thakkar.

Dhara Thakkar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dhara is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.