Dollar Tree Stock Doesn't Offer Much Value Today

DLTR is still up over 21% year-over-year

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Dollar Tree, Inc. (NASDAQ:DLTR) is an operator of discount variety stores. DLTR operates over 15,500 stores across 48 U.S. states and five Canadian provinces, supported by a coast-to-coast logistics network and more than 193,000 associates. Dollar Tree stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.

Dollar Tree stock has increased approximately 23% in the last 12 months, thanks in part to a massive bull gap that occurred in mid-November. The stock touched a record high of $149.37 shortly after. Though it quickly fell lower, with a ceiling emerging at the $144 area, the 60-day moving average captured most of this  negative price action, and DLTR was last seen up 51% at $131.99. 

dltr chart jan 20

Over in the options pits, short term options traders have rarely been more put-biased. This is per DLTR's Schaeffer's put/call open interest ratio (SOIR) of  1.05, which stands higher than 92% of readings from the past year. 

From a fundamental point of view, Dollar Tree stock offers a relatively average valuation. DLTR trades at a price-sales ratio of 1.26 and has a forward price-earnings ratio of 17.79. Moreover, Dollar Tree has grown its revenues by 17% since fiscal 2018 and has increased its net income by $2.97 billion since reporting $1.59 billion in net losses for fiscal 2019.

Dollar Tree is also estimated to grow revenues 6.1% and earnings 34.2% over the coming year. However, the company still holds a weak balance sheet with $701.4 million in cash and $9.77 billion in total debt, making Dollar Tree stock too risky of an investment for value and long-term investors alike.

 

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