It was just about a year ago that deep discount retailer Dollar Tree (NASDAQ:DLTR) was preparing for a near 50% fall from grace. If low-priced goods were your thing, then shares in Dollar Tree was about to become the top-selling item.

There were some hints that lean times were on the horizon. Not only was Dollar Tree flying high -- its shares had appreciated some 37% since the beginning of 2007 -- but it was repurchasing its shares under an accelerated repurchase agreement with both Goldman Sachs (NYSE:GS) and Merrill Lynch. These buyback programs gave earnings an early boost.

While sales were growing, consumers were only just beginning to adjust to the economic changes under way and retailers from Dollar Tree to Wal-Mart (NYSE:WMT) reported a sluggish fourth quarter that showed restraint in holiday spending.

So what was the game changer? It seems only as the recession tightened its grip did the value proposition of the dollar stores take hold with consumers. Getting the most bang for the buck became essential, and when the government showered a few billion dollars on taxpayers in a misguided stimulus attempt, by and large they spent them at the discount stores. Dollar Tree, Wal-Mart, and Family Dollar (NYSE:FDO) all reported higher sales attributed to the government handout.

Company

Q108

Q208

Dollar Tree

7.8%

12.6%

Family Dollar

(5.9%)

2.9%

Wal-Mart

10.3%

10.4%

Fred's (NASDAQ:FRED)

5.0%

5.3%

Big Lots (NYSE:BIG)

2.1%

1.9%

99 Cents Only (NYSE:NDN)

4.5%

4.1%

Represents year-over-year change in sales. Source: Capital IQ.

Although I began to climb the Dollar Tree earlier this year, I haven't always been willing to go out on a limb. The deepening economic malaise, however, has changed my way of thinking -- and a visit to its stores this past weekend has me thinking I might want to put down roots with them. The clean layout, wide selection, and low prices were a compelling surprise for me.

The dollar-an-item concept holds up well in good times, but does particularly well in troubled ones. And while it may have felt constrained by its commitment to stock only products that were $1 or less, its acquisition of the Deal$ store chain has given it an outlet for adding more expensive items.

Even though its shares have bounced well off the lows set at the beginning of the year, at 15 times next year's earnings it is comparably priced to its rivals and offers a competitive value compared to its growth prospects. Dollar Tree seems like an investment that is in full leaf.

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Fool contributor Rich Duprey owns shares of Wal-Mart but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.