Shares of discount retailer Dollar General (DG +1.74%) have surged more than 70% over the past year, as it has been a hot buy in retail. That, however, hasn't always been the case for the stock, as generating strong organic growth has proven to be challenging in the past.
On Thursday, the company reported its fourth-quarter earnings numbers. And while they appeared to be strong, they weren't enough to give the stock a boost. Instead, the company's shares declined on the news. Let's look at what may be weighing the stock down and whether its dip in value makes now a good time to add it to your portfolio.
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Investors are likely worried about future quarters
For the fourth quarter, which ended in January, Dollar General reported $10.9 billion in sales, up 5.9% year over year and slightly beating analyst expectations of $10.8 billion. Its per-share profit of $1.93, however, blew past Wall Street's $1.66-per-share estimate. Its same-store sales were up over 3% for the full year. But for the next fiscal year, the company does expect that to slow to between 2.2% and 2.7%.
Investors, however, may be worried that the economy could deteriorate due to the war in Iran and its impact on inflation. It's a valid concern, given that CEO Todd Vasos said last year that its customers were struggling and that their financial situation had worsened due to inflation. Dollar General's vulnerable customer base could make it more vulnerable to inflation, and if the company is already projecting a slowdown, its growth rate may be even weaker than expected next year.
NYSE: DG
Key Data Points
I wouldn't buy Dollar General stock right now
It wasn't all that long ago that Dollar General was the stock no one wanted to touch. While it had a good year in 2025, up 75%, in each of the two years prior, it was down more than 44%. It was beaten down and arguably overdue for a bit of a bounce back. But today, with serious question marks about its growth and the stock trading at around 25 times its trailing earnings, it isn't exactly a cheap buy anymore. For single-digit growth, that's a bit of a high premium to be paying.
Dollar General's business could face some adversity in the coming months, and given that risk and uncertainty, the stock should trade at a discount. Since it doesn't, I'd consider other growth stocks instead. While it's up around 2% so far this year, I wouldn't be surprised if it goes much lower.
