Dollar General Corp (NYSE:DG) is a discount retailer that offers everything from packaged foods to toys to apparel. The company stocks its shelves with other manufacturers’ brands but it also sells its own discount brands and products.
Over the past five years, the stock has risen by 64% but DG shares have struggled over the past year with the stock well away from its 52-week high of $261.59. For the year, Dollar General stock is down around 33%, so what does the future hold? Where will Dollar General stock be in 5 years?
Discount retailers have historically been popular when times are tough, and recession fears are a big reason why DG share price increased in recent years. But this downturn has been more severe than some expected, with consumers cutting spending down to the bone. This marked shift in consumer shopping trends has started to affect Dollar General’s bottom line.
But the company still increased net sales in the first quarter of 2023. And Dollar General recently raised its dividend to a 1.44% annual dividend yield. Both of these are signs of strength in the face of unprecedented economic challenges and bode well for where Dollar General stock will be in 5 years.
A Recession-Proof Stock That Stood The Test of Time
Dollar General is one of the most recognizable and profitable brands, starting out as a small family business in Scottsville, KY in 1939 and growing to 18,774 stores across both the United States and Mexico.
Now headquartered in Tennessee, it has over 150,000 employees. Historically, the company served rural markets and the strategy has paid off, having grown to a market capitalization of $36.04 billion.
Dollar General stock has been a perennial favorite with many investors because of the company’s aggressive business strategy and nearly recession-proof business, even in tough economic times.
What Is the Dollar General Stock Forecast for 2025
The majority of analysts are bullish and forecast Dollar General shares could rise as high as $285 by 2025, representing a 73% increase from where the stock is currently trading.
The average forecast has the stock growing 32% to around $217. This would be more in line with previous years’ gains.
Even though it’s likely that DG will continue to struggle in 2023, most analysts believe that the company will get back on track by 2025.
Where Will Dollar General Stock Be In 5 Years?
Analysts are even more divided about where the stock will be in the next five years. Some Wall Street analysts expect the stock to plateau around $220, meaning the stock will only deliver gains of 33% over the next 5 years.
Other analysts see the stock continuing to march forward to $275, which would represent a gain of almost 65% over the next five years.
This scenario is more likely given the Dollar General’s strong brand recognition and business model, and taking into account the company’s forecasted growth over the next few years.
How High Will Dollar General Stock Go?
A recent analyst’s forecast has the stock reaching $230 just in the next 12 months, translating to a 40% increase from current levels. With that kind of growth, it’s possible to envision the stock hitting $300 and beyond over the next 5 years.
While a 100% stock increase by 2028 may seem unlikely given the current environment, it’s not out of the question. If inflation and financial pressures ease up, customers are likely to resume their usual spending trends again.
With that said, a discounted cash flow forecast places fair value currently at $178 per share, more in line with the price at which the stock is presently trading.
Is Dollar General a Risky Investment?
Dollar General is a firmly established company with a recession-proof model. But that doesn’t mean it’s immune to economic headwinds. The recent consumer shift has caused the company’s net income to drop from $552.7 million in the first quarter of 2022 to $514.4 million in the first quarter of 2023, a 6.9% decrease.
Even though net sales and same-store sales did increase in the first quarter, the company saw reduced operating profits and diluted earnings per share. The challenges the company faced in the first quarter caused leadership to reduce revenue expectations for 2023, with Dollar General now expecting sales growth of 3.5% to 5% for the rest of the year, instead of 5.5% to 6%.
Even still, the fact that the company has been able to achieve positive sales growth in a very challenging environment is a testament to the viability of the DG brand. And its $0.59 dividend is another positive sign, not least because it has increased by 7.27% versus the year-ago quarter.
Dollar General Price Forecast
Dollar General is a discount retailer with thousands of stores and a well-established brand and business model. Even if the company has faced shrinking revenue due to shifting consumer demands, Dollar General has been able to continue to grow sales.
Out of 31 recent price forecasts, 2 of the analysts still believe that DG will outperform over the next 52 weeks. 14 analysts have the stock as a buy and 12 believe it is a hold. Only 2 of the analysts consider the stock to be a sell.
The median forecast predicts the stock will reach $185 over the next year, which is a 12.5% increase from where DG share price currently sits. That’s because most analysts still believe in the discount retailer, and trust that consumers will continue to shop at Dollar General in the near future.
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