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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", sykesix asked the members: "What do you do if you arrive early at movie besides go to the snack bar?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺🐝🐝🐝 SILVER
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Number: of 22989 
Subject: Re: DG on sale today
Date: 08/27/23 11:08 AM
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No. of Recommendations: 13
One I've been looking at, what are your thoughts on eps growth % over the next 5 years and terminal multiple?
I took $10 eps x 8% @ 5 years x 20 multiple giving s share price of 293 about 12.6% compounded from here.
Eps seems to have stalled somewhat in the last 3 years which explains the slip in multiple from 25 to 15 ish.


Have a look at the other "OT DG" thread mungofitch replies on OT Gurus Focus Dollar General
Most of my thoughts are there, most recently posts 3327&3328, and good thoughts from many others.

I don't view it as EPS having gone flat. If so, you certainly wouldn't want to assume an exit multiple of 20 : )
Rather, I think it's better viewed as a situation of poor comps: they had a nice pandemic boost which is going away, and this year is a bit below average.
Ignore that "hump" in sales and profits, and I believe the overall trend remains for growth in sales per share.
Sales per share grew at around inflation + 10%/year in the last 5 years. To be a bit more conservative I'm pencilling in (WAG) inflation + 6.5%/year in the next five.
I expect net profit margins to hold up at (almost) their historical levels of around 6%. Perhaps a small drop due to rising real interest rates, perhaps not.
(if the interest bill becomes a material issue for them, they can simply pay off some debt...they make a LOT of money)

My DG position is now #2 in my portfolio after Berkshire. (though quite a gap between the two!)
That doesn't mean it's a good idea, not by a long shot.

I imagine their upcoming quarterly release is likely to be weak, with new weak surprises. They have certainly telegraphed it enough. Thursday before open I think?
But I don't speculate on what that will do to their share price short term, nor do I much care.
Nvidia blew it out of the park but the stock price is down. Mr Market often does the reverse of what you think : )

Jim
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This community has written 22,499 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 58 recs · 2023
Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
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