Recently, I discussed Dollar General's (NYSE: DG) first-quarter earnings, which saw net income surge 15% as budget-conscious shoppers turn to the discount retailer's stores in droves. Even with earnings failing to meet the Street's expectations, Dollar General kept its full-year outlook intact. Let's see whether the company could be a good buy.

Income counts
Dollar General has been generating a lot of money from its operations, thanks mainly to growing revenues, as shoppers have looked for more rock-bottom deals. Revenues over a five-year period have risen by 8.8% annually, but over the past four quarters they've increased even faster, at 10.3%. Earnings before interest and taxes have jumped 28.9% over the past four quarters as a result, compared with annual growth of 15.9% over a five-year period.

With revenue growth having outpaced costs in the past five years, the company is becoming more efficient. Even rising commodity prices -- notably, gas -- haven't prevented its bottom line from surging.

Net income, in turn, has risen 65.3% over the past four quarters, and free cash flow has gone up by 47%. Return on equity, meanwhile, has risen over the past five years to 16.7%, from just 7.0% in 2007. Shareholders' money is being put to better use now than before.    

My sense is that this momentum will continue as the company increases its focus on driving sales growth and increasing profitability. It also intends to open another 625 outlets this year, for a unit growth of more than 6%.

How cheap is the stock?
Dollar General's forward P/E seems cheap at 13.0, at least next to peers Family Dollar (NYSE: FDO) at 14.51 and 99 Cents Only Stores (NYSE: NDN) at 16.3. So it looks relatively undervalued compared with its peers.

The enterprise value-to-free cash flow ratio, providing a more inclusive measure of profitability, stands at 26.1. For Family Dollar, the number stands at 28.2, and at 99 Cents Only, it's 65.8.

The Foolish bottom line
The stock looks cheap and could be worth the investment going forward. It seems to be an attractive deal as the company looks to expand its operations as the year rolls on. What say you, Fools?

Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.