No. of Recommendations: 7
^^So 9 years ago the stock price was virtually the same, actually far higher considering inflation. And you probably have at least twice as many stores as 9 years ago.^^
That makes it a better investment starting today than starting back then. Also if the value (and forward expected return) back then was reasonable, then what you are writing here implies that it is very good value today.
I like that you are enthusiastic by cheering their expanding sales, but the problem though is that margins have declined under their full knowledge of the various problems causing the margin decline, but unable to reach to it. It was a not a case of deliberate temporary margin compression but something that might be beyond Dollar General's control.
I'm not so against the possibility that it is a great investment from today's price.
However margins could fall from the present 3.5% net margin to 0% with only a small increase in expenses owing to the fixed costs. They don't own their buildings so have to pay rent, plus they have significant corporate debt.
Market cap - $18B
Enterprise Value - 35B
Net debt - $17B
Their debt is as large as their market cap. For now that is okay, but cash flow can go to zero pretty quickly.
Just blindly assuming that they will return to past margins - when they have been trying to do this over many quarters unsuccessfully - should be assumed cautiously. Or if you think they can raise margins, you have to be also able to explain why they have been falling the last 6 quarters and what they are doing differently in the next quarters (compared to the last few) that will change that.
