Dollar General: Zacks’ Bear of the Day Play

Dollar General (DGFree Report)  is a discount retailer that provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. The Company separates its merchandise into four categories, which includes highly consumable, seasonal, home products and basic clothing. Dollar General is based in Tennessee and has 13,000 stores in 43 states. The stock is the Bear of the Day after being downgraded to a Zacks Rank #5 (Strong Sell) and after poor earnings earlier last month.

The company has a market cap of $19 billion and a Forward PE of 15. The stock sports Zacks Style Scores of “B” in Value and Growth, but “C” in Momentum. The stock has been hammered of late, as an earnings report in August disappointed. It’s off over 25% since the report, but due to falling estimates, investors should stay away.

Q2 results

The company reported Q2 EPS on August 25th, where it missed on both the top and bottom line. The big red flag was the comparable sales which came in lower than expected. The report sent the stock tumbling, falling from $90 a share to $75. Now with the stock under $70, estimates continue to be revised lower, a sign it’s still time to avoid the stock.

Estimate Revisions

Over the last 60 days, estimates have been revised lower for all time frames. For fiscal year 2016, the numbers have been taken down 2.8%, from $4.64 to $4.51. For next year, estimates are now seen at $4.95, down from $5.17 or 4.2%.

A Better Option

Big Lots (BIGFree Report) is a Zacks Rank #2 (Buy) that is one of the leading value retailers specializing in closeout merchandise and toys. The company was founded in 1967, operates over 1,400 stores and is headquartered in Columbus, Ohio.

Big Lots has a market cap of $2 billion and a Forward PE of 13. The stock sports Zacks Sytle Scores of “A” in both Value and Growth.

On August 26th the company beat EPS by a 15%, while it missed slightly on revenues. Revisions to earnings estimates have spiked higher over the last 60 days. For fiscal year 2016, estimates have been revised 1.1% higher, while 2017 has seen a 0.7% rise.

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More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today’s Zacks “Strong Sells” absolutely free >>.

In-Depth Zacks Research for the Tickers Above


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