Dollar Tree, Inc. (DLTR) Is a Trending Stock: Facts to Know Before Betting on It

Dollar Tree (DLTR) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Shares of this discount retailer have returned -3.9% over the past month versus the Zacks S&P 500 composite's +0.7% change. The Zacks Retail - Discount Stores industry, to which Dollar Tree belongs, has lost 0.3% over this period. Now the key question is: Where could the stock be headed in the near term?Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.Earnings Estimate RevisionsHere at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.For the current quarter, Dollar Tree is expected to post earnings of $1.06 per share, indicating a change of +9.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.For the current fiscal year, the consensus earnings estimate of $5.32 points to a change of -9.7% from the prior year. Over the last 30 days, this estimate has changed -0.1%.For the next fiscal year, the consensus earnings estimate of $6.01 indicates a change of +12.9% from what Dollar Tree is expected to report a year ago. Over the past month, the estimate has changed -0.5%.Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Dollar Tree is rated Zacks Rank #4 (Sell).The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSRevenue Growth ForecastWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.In the case of Dollar Tree, the consensus sales estimate of $7.45 billion for the current quarter points to a year-over-year change of +1.9%. The $30.71 billion and $31.98 billion estimates for the current and next fiscal years indicate changes of +0.3% and +4.1%, respectively.Last Reported Results and Surprise HistoryDollar Tree reported revenues of $7.37 billion in the last reported quarter, representing a year-over-year change of +0.7%. EPS of $0.67 for the same period compares with $0.91 a year ago.Compared to the Zacks Consensus Estimate of $7.5 billion, the reported revenues represent a surprise of -1.74%. The EPS surprise was -34.95%.The company could not beat consensus EPS estimates in any of the last four quarters. The company could not beat consensus revenue estimates in any of the last four quarters.ValuationWithout considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.Dollar Tree is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.ConclusionThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Dollar Tree. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks