Shares of Dollar General (DG) have fallen more than 11% in the last month, but things started to turn around this Friday morning. The company reported that CEO Todd Vasos would return to the helm and shares jumped 10%. This is the biggest single-day jump since May of 2022.
This came after the previous CEO of Dollar General Corp. Jeff Owen stepped down amidst a tumultuous year that saw shares plummet and grave workplace safety concerns. Shares lost more than ⅔ of their value in the year Owen was in charge.
Some of this can be attributed to a tough economic climate with mounting inflation. But, this environment actually should have served Dollar General well as customers looked for deals. Yet, store safety and employee retention has been the biggest challenge for the company.
In fact, the company was the first major retail store to become a “severe violator” of federal workplace safety laws. This was the manifestation of hundreds of failed government inspections. Plus, the vast majority of hourly employees aren’t granted paid sick leave.
The board of directors determined that a leadership change was the only way to regain stability and confidence in the company’s future. And, what better way than bringing back the CEO who grew shares by 230%, doubled annual revenue, and oversaw the opening of 7,000 stores?
Vasos served as CEO for more than seven years, and some analysts are comparing this play to that of Walt Disney Co. bringing back CEO Bob Iger.
But, in the same breath, those same analysts fear that improvements are not going to be seen for a while. This is a big hole to climb out of, and competitors like Dollar Tree are stronger than ever as Dollar General flounders.
That being said, VectorVest deems it time to sell DG – and we’ll share three reasons why below.
DG Has Fair Safety, But Poor Upside Potential and Timing
VectorVest simplifies your trading strategy by giving you all the insights you need in 3 ratings. This saves you time and stress while empowering you to win more trades with less work. These ratings are relative value (RV), relative safety (RS), and relative timing (RT).
These sit on an easy-to-interpret scale of 0.00-2.00 with 1.00 being the average. Better yet, you’re given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock, at any given time. As for DG, here’s what we’ve uncovered:
- Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. As for DG, the RV rating of 0.83 is poor. The stock is currently overvalued, too, even after shares lost 52% in the past year. Its current value is just $90.
- Fair Safety: DG is a fairly safe stock with an RS rating of 1.00 - right at the average. This rating comes from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Poor Timing: Despite turning things around today, DG has been on a downward trend for the past year and counting. The stock has a poor RT rating of 0.56. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.80 is poor for DG, and this is why VectorVest rates it a sell at this time. Learn more in a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. DG is up 10% today after the previous CEO returns to the helm. But, despite being a fairly safe stock, it has poor upside potential and timing.
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