DG

We rate DOLLAR GENERAL CORP (DG) as a Buy with a composite score of 65.6/100 at a current price of $151.98. The stock scores above average across the majority of our six quantitative factors and ranks #263 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (91th percentile) and stability (82th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (28th percentile) and quality (51th percentile) tempers our overall conviction. We assign a No Moat rating (37/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

DOLLAR GENERAL CORP holds an above-average position (#14 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 65.6/100 places it at rank #263 in our full 7,333-stock universe. With a $21.7B market capitalization, DOLLAR GENERAL CORP operates at meaningful scale within the Retail Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 4% and favorable momentum (91th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 30% (-5.9pp vs sector) narrow to operating margins of 5% (+0.6pp vs sector) and net margins of 3.0%, yielding a gross-to-net conversion rate of 10%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $151.98, DOLLAR GENERAL CORP appears undervalued relative to its fundamentals. Our value factor score of 71/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 25.9x (a 21% premium to the sector median of 21.4x), EV/EBITDA of 17.3x (at a premium), P/B of 4.0x, P/S of 0.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to DOLLAR GENERAL CORP. The stock presents a balanced risk profile: significant leverage (287% debt-to-equity) and low beta of -0.06 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (287% debt-to-equity); low beta of -0.06 — while defensive, this may indicate limited upside participation in bull markets; the combination of leverage (287% D/E) and thin margins (3.0% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 82th percentile and quality factor at the 51th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (82th percentile) suggests predictable business dynamics; a 2.39% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate DOLLAR GENERAL CORP's capital allocation as Poor. Key concerns include elevated leverage (287% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — DOLLAR GENERAL CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, DOLLAR GENERAL CORP receives a Buy rating with a composite score of 65.6/100 (rank #263 of 7,333). Our quantitative framework assigns a No Moat (37/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 65/100.

Our analysis supports a constructive view on DOLLAR GENERAL CORP. The combination of the current valuation, medium uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.