Today we're going to take a look at the well-established Dollar Tree, Inc. (NASDAQ:DLTR). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$118 at one point, and dropping to the lows of US$97.50. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Dollar Tree's current trading price of US$98.68 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dollar Tree’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Dollar Tree still cheap?
Good news, investors! Dollar Tree is still a bargain right now. According to my valuation, the intrinsic value for the stock is $126.25, but it is currently trading at US$98.68 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that Dollar Tree’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Dollar Tree generate?NasdaqGS:DLTR Earnings and Revenue Growth July 16th 2021
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Dollar Tree. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since DLTR is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DLTR for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DLTR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
So while earnings quality is important, it's equally important to consider the risks facing Dollar Tree at this point in time. In terms of investment risks, we've identified 1 warning sign with Dollar Tree, and understanding it should be part of your investment process.
If you are no longer interested in Dollar Tree, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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