Dollar General Corporation (DG): A Bull Case Theory

We came across a bullish thesis on Dollar General Corporation on RM Capital Partnership’s Substack by RM Capital Partnership. In this article, we will summarize the bulls’ thesis on DG. Dollar General Corporation's share was trading at $108.76 as of August 29^th. DG’s trailing and forward P/E were 20.14 and 19.68 respectively according to Yahoo Finance.

Dollar General (DG) exemplifies the power of a simple, resilient model: small stores located close to home, offering essential consumables at consistently low prices. With over 20,500 stores across 48 states, DG is often the only general merchandise option in rural America, where 75% of households live within five miles of a location. Its business is built around quick, $10 fill-in trips, with 80% of revenue driven by staples like snacks, groceries, cleaning supplies, and health & beauty.

While margins on consumables are thin, non-consumables and private brands provide profit leverage, and initiatives like DG Fresh have lowered costs while expanding fresh and frozen offerings. Competitors like Walmart, Amazon, and Temu cannot replicate DG’s niche: immediate-need, small-basket, paycheck-to-paycheck households seeking convenience and affordability. Walmart may win on unit price, but DG’s proximity and speed keep it competitive, while Amazon and Temu are disadvantaged by order minimums and product mix.

Inflation and tariffs pose challenges, yet they also reinforce DG’s value, drawing households down from higher-cost channels. Its moat rests on capital-efficient small-box economics, deep alignment with low-income shoppers, and a consumables-led merchandise mix that drives recurring trips. Management, led by returning CEO Todd Vasos, is stabilizing operations after execution missteps, focusing on shrink reduction, remodels, and higher-margin growth levers like pOpshelf and digital media. At a $24B market cap and ~12× FCF, DG trades at a discount that underestimates its earnings power. Margin recovery and buybacks could drive double-digit compounding, making DG a durable compounder with substantial long-term upside.

Previously we covered a bullish thesis on Dollar General Corporation (DG) by Tyler Moody in October 2023, which highlighted margin compression but argued stabilization would restore profitability. The company’s stock price has appreciated approximately 35% since our coverage. This is because execution and resilience improved. The thesis still stands as structural economics remain intact. RM Capital Partnership shares a similar view but emphasizes management reset and long-term compounding.

Dollar General Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held DG at the end of the first quarter which was 53 in the previous quarter. While we acknowledge the potential of DG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.