While the S&P 500 is up 13% since May 2025, Dollar General (currently trading at $103.68 per share) has lagged behind, posting a return of 5.6%. This may have investors wondering how to approach the situation.
Is now the time to buy Dollar General, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Dollar General Not Exciting?
We're sitting this one out for now. Here are three reasons we avoid DG and a stock we'd rather own.
1. Same-Store Sales Falling Behind Peers
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Dollar General’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.3% per year.
2. Low Gross Margin Reveals Weak Structural Profitability
At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.
Dollar General has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 29.9% gross margin over the last two years. That means Dollar General paid its suppliers a lot of money ($70.09 for every $100 in revenue) to run its business. 
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Dollar General’s $17.07 billion of debt exceeds the $1.28 billion of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $3.03 billion over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Dollar General could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Dollar General can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Dollar General’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 16.2× forward P/E (or $103.68 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our all-time favorite software stocks.
Stocks We Like More Than Dollar General
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