Here's Why Dollar Tree at 12.48X P/E Might Be Your Next Value Pick

Dollar Tree, Inc. DLTR is currently trading at a notable low price-to-earnings (P/E) multiple, which is well below the averages of the Zacks Retail - Discount Stores industry and the broader Retail-Wholesale sector. With a forward 12-month P/E of 12.48X, DLTR is priced lower than the industry average of 30.13X and the sector average of 25.24X.The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the retail apparel sector.DLTR Stock's P/E Performace Image Source: Zacks Investment Research DLTR has gained 8.5% in the past three months, outperforming the industry’s 3.3% increase. Its sales growth across segments, higher traffic trends and market share gains have helped the company outperform the broader sector and the S&P 500, which grew 6.9% and 4.2%, respectively, in the same period.DLTR Stock's Price Performace Image Source: Zacks Investment Research Dollar Tree Expands Stores & Multi-Price Strategy for GrowthDollar Tree has made notable strides in enhancing its store portfolio through new openings, renovations, re-banners and closures. The company’s key real estate initiatives are yielding strong results, particularly with the expansion of its $3 and $5-plus assortment in Dollar Tree stores and Combo Stores.Dollar Tree has successfully rolled out $3, $4 and $5 frozen and refrigerated items while advancing its multi-price expansion strategy. As part of its growth plans, the company is expanding its product range, offering shoppers a broader selection across categories like food, snacks, beverages, pet care and personal care.The company has successfully converted 720 stores to the 3.0 format in the third quarter of fiscal 2024, bringing the total to nearly 2,300 stores. These multi-price 3.0 stores contributed around 30% of the company’s quarterly net sales and saw 3.3% comp growth, driven by a strong 6.6% increase in consumables.The company plans to convert 300-400 more stores to the 3.0 format by the end of the fiscal year, which is expected to enhance comps and profitability. With nearly 3,000 multi-price 3.0 stores in operation, Dollar Tree is nearing completion of its 99 cents store integration.In the third quarter of fiscal 2024, Dollar Tree opened 255 new stores, including Dollar Tree and Family Dollar locations, and re-badged four stores under a different format. However, the company also closed 49 stores as part of a broader review of its store portfolio. This restructuring aligns with Dollar Tree's plan to enhance the performance of its stores by focusing on high-potential locations and optimizing underperforming areas.How are Estimates Faring for DLTR Stock?Indicating the positive sentiment surrounding DLTR, the Zacks Consensus Estimate for earnings per share has seen an upward revision. In the past 30 days, analysts have increased their estimates for the current and the next fiscal years by 0.7% to $5.39 and 0.3% to $6.06 per share, respectively.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar. Image Source: Zacks Investment Research Current Pressures on DLTR StockDollar Tree has faced higher selling, general and administrative (SG&A) expenses in recent quarters, primarily due to rising operating costs. In the third quarter of fiscal 2024, SG&A expenses as a percentage of total revenues increased compared to the previous year. This was driven by higher depreciation from store investments, the use of temporary labor to support the multi-price rollout, elevated utility costs and a lack of leverage from increased same-store sales.Dollar Tree’s Family Dollar segment has been pressured by soft spending trends among low-income consumers, resulting in soft demand for discretionary items. The lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits. These trends underscore the increasing financial stress on lower-income households, who are directing their spending toward needs-based goods. The macro factors have been hurting customer sentiment and, in turn, the discretionary demand and buying behavior.Investment Opinion on DLTR StockDollar Tree stock appears attractive for investors seeking undervaluation, as its price-to-earnings ratio is lower than its industry peers. The company’s strategic initiatives, including store renovations, re-banners and closures, position it well for future growth. These efforts, along with its expansion into higher-price items, enhance the potential for capitalizing on its growth trajectory.However, Dollar Tree faces challenges, including soft spending trends among low-income consumers, which impact its Family Dollar segment, and rising selling, general and administrative expenses. These factors introduce some uncertainty, prompting a more cautious approach to investing in the company. As of now, Dollar Tree has a Zacks Rank #3 (Hold), reflecting a neutral outlook for the stock.Three Picks You Can't MissWe have highlighted three better-ranked stocks in the broader sector, namely Deckers DECK, The Gap, Inc. GAP and Abercrombie & Fitch Co. ANF.Deckers, a footwear and accessories dealer, currently sports a Zacks Rank #1 (Strong Buy). DECK delivered an earnings surprise of 41.1% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Deckers’ fiscal 2024 sales and earnings indicates growth of 13.6% and 12.9%, respectively, from the year-ago reported figures.Gap operates as an apparel retail company, which offers apparel, accessories and personal care products for men, women and children. It presently flaunts a Zacks Rank #1.The Zacks Consensus Estimate for Gap’s fiscal 2024 sales and earnings indicates growth of 0.7% and 41.3%, respectively, from the year-ago quarter’s reported numbers. GAP has a trailing four-quarter earnings surprise of 101.2%, on average.Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. Abercrombie has a trailing four-quarter earnings surprise of 14.8%, on average.The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings indicates growth of 15% and 69.3%, respectively, from the year-ago reported figures.Just Released: Zacks Top 10 Stocks for 2024Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>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 Report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report The Gap, Inc. (GAP): 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