To The Moon

Earnings Calendar (24 Mar 2025)

The most anticipated earnings releases for the week of March 24, 2025

I look forward to Lucid, Lululemon, Gamestop, McCormick, Jefferies and Dollar Tree earnings.

Let us look at Dollar Tree.

Description of business taken from QuickFS

Dollar Tree has a “Sell” rating for Technical Analysis. The Analysts’ Sentiment is “neutral”. The price target is $83.29 which suggests an upside of 24.78%. The stock price fell 46.9% from a year ago.

Revenue

• Growth Trend: Dollar Tree's revenue has grown significantly over the decade, increasing from $8.602 billion in 2015 to $30.604 billion in 2024. The 10-year compound annual growth rate (CAGR) for revenue is 14.6%, reflecting strong expansion.

• Key Milestones: Revenue growth was particularly notable in 2016 (80.2%) due to the acquisition of Family Dollar, with consistent growth in most years, peaking at 33.7% in 2017. However, there were slowdowns, such as a 3.5% decline in 2022 and modest growth of 3.2% in 2023.

• Competitive Advantage: The high revenue CAGR indicates Dollar Tree’s successful expansion through acquisitions and organic growth, leveraging its low-price model to capture a broad customer base in the discount retail sector.

Operating Profit

• Growth Trend: Operating profit grew from $1.040 billion in 2015 to $2.236 billion in 2023, before dropping sharply to $187 million in 2024. The operating margin has been volatile, peaking at 12.1% in 2015 and dropping to a low of 0.6% in 2024.

• Challenges: The significant decline in operating profit and margin in 2024 (-5.9% ROIC) suggests operational challenges, possibly due to rising costs, inflation, or integration issues post-acquisition.

• Competitive Advantage: Despite recent struggles, Dollar Tree maintained profitability in most years, reflecting its ability to scale operations. However, the 2024 drop raises concerns about cost management.

Earnings Per Share (EPS)

• Growth Trend: EPS increased from $2.90 in 2015 to $7.21 in 2023, before plummeting to -$4.55 in 2024. The 10-year EPS growth has been inconsistent, with a sharp decline of -192.8% in 2019 and a significant drop in 2024 (-163.1%).

• Volatility: EPS growth has been erratic, with peaks like 200.0% in 2017 and 151.9% in 2020, but also major declines, reflecting sensitivity to operational and economic factors.

• Competitive Advantage: The long-term EPS growth (prior to 2024) suggests Dollar Tree has been able to generate shareholder value, but the 2024 loss indicates potential challenges in maintaining profitability.

Price-to-Earnings (P/E) Ratio

• Valuation: The P/E ratio is negative at -13.7, reflecting the 2024 earnings loss. This indicates that the market may be pricing uncertainly about future profitability.

• 10-Year Median Returns: The 10-year median return on assets (ROA) is 6.0%, return on equity (ROE) is 18.0%, and return on invested capital (ROIC) is 8.0%, suggesting decent historical returns but with recent declines (e.g., -4.4% ROA in 2024).

• Competitive Advantage: The historical ROE and ROIC indicate efficient use of capital in prior years, but the negative P/E and recent returns highlight short-term challenges.

Free Cash Flow (FCF)

• Growth Trend: The EV/FCF ratio is 18.8, and the 10-year CAGR for FCF is 2.2%, indicating modest growth in free cash flow generation. FCF has been positive but not a standout metric compared to revenue growth.

• Capital Structure: The median debt/equity ratio is 1.1, and debt/assets are 0.4, suggesting a balanced approach to leverage.

• Competitive Advantage: While FCF growth is modest, Dollar Tree’s ability to generate positive cash flow supports its expansion strategy, including store openings and acquisitions like Family Dollar.

Other Key Metrics

• Gross Profit and Margin: Gross profit grew from $3.034 billion in 2015 to $9.352 billion in 2024, but the gross margin declined from 35.3% in 2015 to 30.5% in 2024. This suggests pressure on profitability, possibly due to rising costs or competitive pricing.

• Return on Invested Capital (ROIC): ROIC fluctuated significantly, peaking at 27.2% in 2015 and dropping to -5.9% in 2024. The 10-year median ROIC of 8.0% indicates moderate efficiency in capital use over the period.

• Competitive Advantage: Dollar Tree’s ability to maintain a gross margin of around 30% and a historically positive ROIC reflects its competitive pricing model and operational scale, though recent declines signal challenges.

Overall Assessment

Over the past 10 years, Dollar Tree has demonstrated strong revenue growth (14.6% CAGR), driven by the Family Dollar acquisition and its low-price retail model, which has allowed it to capture market share in the discount retail sector. Operating profits and EPS showed growth in most years but faced significant declines in 2024, reflecting operational or economic challenges. The company does not pay dividends, focusing instead on reinvestment, which has supported its expansion strategy. The negative P/E ratio and recent drops in ROIC and operating margin highlight short-term struggles, but historical metrics like ROE (18.0% median) and revenue growth underscore its competitive advantages, including a scalable business model and a strong presence in the value retail market.

The earnings revenue and EPS forecast are $8.24B and $2.19 respectively.

Given the above, I prefer to monitor the stock especially the dip in recent profitability. With the P/E ratio entering a negative region, I recommend caution. Does this represent the business or a wider market sentiment?

@TigerStars

$Dollar Tree(DLTR)$

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