Stock price when the opinion was issued
DG dropped significantly after the earnings release and is now trading at 11.8x Forward P/E, a record low compared to historical averages. The reason for the sharp drawdown was mainly due to weak operating results and a downward revision in guidance. In the 2Q, DG’s revenue grew 4% to $10.2B, missing estimates of $10.37B and EPS of $1.7 also missed estimates of $1.79. DG revised guidance in same-store sales down, which is expected to be between 1%-1.6%, a reduction from 2%-2.7% that DG previously forecasted. The company mentioned the weak results were largely due to financially constrained customers, however, both WMT and TGT reported solid numbers a few weeks ago. The balance sheet is leveraged with a net debt/EBITDA of 3.0x, which DG is paying down gradually. DG brought back the old CEO with the hopes that he could turn around the company’s operations, which have decelerated meaningfully in recent years. Overall, a very weak earnings result - we think investors are better off looking somewhere else until DG demonstrates a path to recovery.
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He will never pick a bottom -- there are people who are really good at it, but it's not his strength. Underperforming since January 2023. Bad couple of days on top of a horrible 2 years. Stay away. Weak RSI and broken technicals.
He looks for fundamentals to show that something is changing for the better, accelerating numbers, and price behaviour that supports that view.
He sold it in April and now owns Costco in this space. It is trying to turn things around and get efficiencies up. It plunged after an announcement in late August.